The Korean Won’s Current Woes

The Korean Won’s Current Woes
(Never made through the pipeline in April)

NINJA (no income and no job) mortgages and The Economist’s perpetual warnings regarding the US housing market bubble for the last five years are well served by an anonymous Korean investment manager who told me a few weeks ago, “We don’t need any more forecasts.” There is blood in the streets. The website motleyfool.com suggested nearly 25% of US mortgages could turn into “jingle mail” where owners send the keys in for foreclosure because paying a mortgage on a house that is worth considerably less than its mortgaged amount is not a good investment. Some owners would prefer bankruptcy to pay rolling US banks’ risky and speculative losses on the housing market.

At the same time it is very difficult to separate Korean economics from the current US economic quagmire. Korea ’s exports depend on commodities pricing in oil, iron ore and steel and are more expensive to make and ship abroad because of what is happening to S.S. America at this time. Consumers appear to be tightening their belts. This means they are buying fewer new cars and household goods stamped Hyundai, Samsung or LG. Koreans are locally fixing prices on a number of staple items in a sort of national battening down of the hatches in the event of rising inflation or “stagflation” where the won valuation may continue to fall but prices keep rising.

In “The Lexus and the Olive Tree” Thomas Friedman warned that the future of economic crises in the globalized world is perpetually the fault of issuing bad loans to bad borrowers. Further he noted due to increased economic interconnectedness one should be prepared for more frequent global economic crises. Does that mean a bottom can be painted on current US dollar values which affect the Korean won so heavily? For some weeks now the US Federal Reserve has been attempting to do that. Is there a global recession at this time? We may observe the US dollar and Korean won exchange has displayed recessionary-type indicators lately for reasons relating to how interconnected the US economy is with Korea and most of the globe. Jay and Gar, Canadians living in Daegu wrote that they were quite worried about these current exchange rates and are there any recommendations to be made considering wiring money home? Well, unless you are paying off debts at home you might consider keeping it here in a term deposit hovering around 5% annually depending on your bank and also however long you plan to stay here. The more US dollars or foreign currency you purchase the lower the value the Korean won is pushed. Conversely the more Korean won you refuse to sell in exchange the higher the value the won may rise.

Even the longest recessionary cycles in recent times since 1945 have not exceeded 10 months and since 1919 (including The Great Depression) this average period increases to 14 months. My best buddy (a wild and crazy day trader) suggests that the current exchange rates may also be impacted by dividend season at Korean stock exchanges with foreign investors converting their gains to US dollars. Thus some of the current rates may be part of a periodic annual event at this time of year which coincides with the US sub-prime correction. So depending on your time in country you might like to locally invest in the interest of waiting out the current exchange rates. However, if you have an investor’s mindset already, you might also paradoxically seek to purchase US dollars in the hopes that they may rise again sometime in the next year and a half. J.P. Morgan said, "Any man who is a bear on the future of this country will go broke." Buy low sell high? Have we reached the bottom yet? Let us hope this also applies to the Korean won’s current woes.

http://www.nber.org/cycles.html

The Fly Fishing Day Trader

The Fly Fishing Day Trader

Mr. William McRoberts can often be found fishing the Namdaecheon River in Yang Yang, Gangwondo where he lives and teaches English at Kwandong University . For much of the rest of his leisure time McRoberts pursues another interest, the Korean stock market. This patient rural fishing gentleman is a day trader. So asking him to give pointers regarding entering the Korean stock for beginners was a natural choice. “First of all you have to be aware that there are risks involved in the market. Only invest money you can afford to lose” He recommends, “You can start with as little as 1.000.000 won. Simply visit a securities firm, with your passport, and open an account. They will give you (download to a memory stick) a program to trade from any computer. There are security features to prevent hacking.” Concerning the technology, “The Korean exchange is all electronic, meaning no humans are involved in the trade. You choose a price that you want to buy or sell at and wait. If you want the going price, you get the stock trade immediately.” Regarding current level of fluency in Korean he adds, “You don't have to know Korean to be successful. All stocks have numbered codes. You can review the Korean stock on Yahoo finance, by entering the code, say 004020 for Hyundai Steel, and add .ks to get 004020.ks and you can see charts, high lows and some other limited data. The program you trade with will have more data, but it's in Korean and you will have to dig around to find it.” If you seek a human face to go with your trades, McRoberts cautions, “If you want the agent with the securities firm he can recommend stocks and even buy them for you, you will have to pay a 3 or 4 % fee. I would avoid this. Make your own decisions. It's more fun.” On the topic of taxes and fees, McRoberts is calming, “There are taxes and fees that all securities firms charge, but they are peanuts. Buying or selling is 0.025 % or about 25.000 won on a 10.000.000 trade.” On choosing evaluation tools, “The best indicator for the beginner is the Price to Earnings ratio. This means the price of the stock, divided by the earnings over one year. Hyundai steel traders about 11 to one. So the stock is about 78,000 won per share so they had earnings last year of approximately 7000 won per share. The lower the P/E number the cheaper the stock is. A good starting point would be a stock or stocks under 12. And don't put all your eggs in one basket. Buy a range of companies you understand, or are interested in. Don't sell when others are panic selling. Hold on.” McRoberts remains a fisherman, “Many Koreans see the stock market as a tool for gambling, expecting a quick buck, and prices can swing significantly, but if you are patient, and choose good stocks with future earnings potential, you should make money, over the long term.” Doing your own research and learning as you go are key recommendations, “It pays to research where the sector and the economy is going. Trying to pick bottoms in the stock price is a fool’s game. Remember the stock price today usually reflects the conditions that it is trading in today. But, it is worth trying a little investing, even if it is an education. You can direct deposit money each month, and over time it builds up. You can trade as little as one share. So to sum up, opening an account is simple, you can trade on line, and fees are very cheap.” As with every successful fisherman, McRoberts concludes with a precious maxim, “Patience is the key. Look to the future and access what areas of the Korean economy should be prosperous. Choose a sound leader in the sector. Sell if the stock hits new highs at low trading volumes. Some say sell any stock once you lose 8 % , but that could be raised to 10 or 12 % because of the swings in prices here in Korea . Keep slowly rising stocks. Sell fast rising ones. Don't average down if the stock falls. Greed and fear drive market swings. Be ready to ride out the storms, and you should be fine. Good investing.” If you have further questions, Bill may be contacted at: wmcrgood@yahoo.com

Canada Continues Pressing to Re-Open Korean Market to Canadian Beef Exporters

Canada Continues Pressing to Re-Open Korean Market to Canadian Beef Exporters
(MarketWatch)

The Government of Canada is continuing to work hard to re-open the Korean market to our world-class Canadian beef. Based on science and international standards, the Canadian beef industry has a strong case and we are committed to regaining market access for Canadian exporters.

Commentary: The riot fires have barely cooled on the last big local emotional debacle which was President Lee's incubus, "The US Beef Riots of 2008." Is it really the optimum time to visit this issue locally in Korea? Wouldn't it be better to foist Canadian offshore university campuses here first?

"The quality and safety of Canadian beef is recognized around the world," said Canada's Agriculture Minister, Gerry Ritz. "We are committed to providing our exporters with every possible opportunity and we are working to resume trade to Korea as soon as possible."

Commentary: Was not the "Mad Cow" which spoiled USDA beef's positioning in Korea found to originate in Canada?

Canadian and Korean veterinary officials held technical negotiations November 3-4, 2008, aimed at moving toward an agreement on the import requirements for Canadian beef. Restoring market access will allow Korean consumers to access safe, high-quality Canadian beef and beef products at competitive prices.

Commentary: None of the major Korean retailers have taken on USDA beef for fear of store burnings and loss of local market image. Canadian beef would then be subject to USDA beef competition for back alley sales.

Korean officials will be visiting Canada later this month to conduct on-site visits to Canadian beef slaughter facilities to see first hand the effectiveness of Canada's food safety and animal health safeguards.

Commentary: I hope they are not directed to Maple Leaf plants.

Korea banned imports of Canadian beef in May 2003, after bovine spongiform encephalopathy (BSE) was discovered in a Canadian cow. Prior to that point, Korea represented the fourth-largest market for Canadian beef, with $50 million in annual sales.

Commentary: A case of a bad apple which spoils the export barrel.

In May 2007, the World Organisation for Animal Health (OIE) officially categorized Canada as a Controlled Risk country for BSE, meaning the standards implemented in Canada meet the requirements for safe trade in a broad range of commodities.

Commentary: It might be better to move forward with a comprehensive free trade agreement first allowing Canadians to concede that Koreans are not much interested in North American cars. It just does not appear an opportune time to be pushing Canadian meats on Koreans with protectionist tendancies in a bear market. Their national hanwoo cow sentiments do not rest deeply and any gaulings might raise their gall.

B.C. Exporters to China Say ‘Seller Beware’ (More than two bits)

B.C. Exporters to China Say ‘Seller Beware’(Vancouver Sun – Joanne Lee-Young)

Some Chinese banks cite typos to help clients avoid paying for deals

The deal was signed, the lumber was shipped and received, and the B.C. company had sent off all the usual trade documentation so that it could collect payment from a buyer in China. But the buyer's bank in China refused to release funds because of a single typo. Instead of specifying "anti-surfaced stain," the B.C. company submitted a corresponding page that mistakenly read "anti-surfac stain."

Commentary: This might explain why many companies are demanding cash in advance at this time.

In another case, a B.C. company listed its name, for example, as "ABC Limited" on one sheet, which didn't exactly match the "ABC Ltd." that the Chinese bank had on its copy. Again, no money. In yet another example, a Chinese bank declined to pay, citing that pages in a document were numbered incorrectly, as one page was unmarked.

Commentary: Documentary requirements are being closely monitored for exactly these reasons, typos, incorrect details, descriptions, spellings, etc.

It's no surprise that it is becoming harder to get the so-called "letters of credit" that companies in different countries use to trade with each other via international banks. Markets are tight everywhere.

Commentary: Typically confirmed and irrevocable letters of credit will not impede payments due to small clerical errors which may be easily corrected especially if the two banks are quite familiar and the buyers and sellers are regular customers.

But B.C. companies exporting to China should, in particular, be aware that some banks in China are taking it to another level, nitpicking through already signed-and-sealed contracts and citing minor typos, spelling and punctuation mistakes so that their clients can wriggle away without paying.

Commentary: There can be no loss on an irrevocable and confirmed letter of credit.

"We had a meeting last week and [several trade officers from various banks] shared the same experience – whether from Vancouver, Toronto, New York or Hong Kong – that the Chinese LCs [letters of credit] are beginning to take the worse practices of their past," said Alban Lo, a Vancouver-based trade finance officer. "They are recently re-practicing a bad habit of digging up frivolous discrepancies. By finding these, they have a good pretext not to pay."

Commentary: This is against international chamber of commerce practices.

Observers – the bankers and the B.C. exporters themselves – have some reasonable guesses about why this is happening. For one, the prices of many commodities that are traded from B.C. to China via letters of credit have plunged. "The prices have worked against the Chinese buyers. If they commit to the payment, they are inheriting a loss," said Lo. "If they [don't] pick up the goods and if they can get out of [a contract], they can save a ton of money." This would make the reneging a one-off, commercially-driven decision.

In a worse scenario, a deeper drop-off in demand for these goods could be at play. Indeed, the situation comes as lofty academics, online bloggers and ordinary factory owners and workers alike are all vying to share their two bits about a slowing Chinese economy. How severe a slump? Hard landing versus soft landing? Many views are chicken-and-egg, citing China's place as a reprocessor of the world's commodities, both importing and exporting in vast quantities.

Commentary: Two bits? Am I sharing just two bits? I thought I was sharing well over six figures of bits in actual and opportunities costs for education and more than a dozen years of international contracts experience? Lofty? I think I am down and dirty?

Lo emphasized that "we don't believe that this is the practice of the major banks in China, especially the ones from larger centres like Beijing and Shanghai. We suspect that it is happening out of smaller pockets of China, where banks have more allegiance to their customer than to a head office."

Commentary: The Golden Rule needs to be applied. Do not accept letters of credit from banks of unknown or questionable reputation or a history of such practices. As well as not accepting credit orders from unknown buyers.

Whatever the case, B.C. exporters are also being pressured to make amendments to existing letters of credit. These include extending expiry dates, reducing order sizes and deferring delivery dates.

Commentary: These are reasonable requests and are permissable if in agreement between the buyers and sellers and represent further amendments to agreements on general terms and conditions in the original contract.

Even if they are eager to fire up stalled trade, local companies should not rush out these amendments as they might have before. There are some basic ways to take heed, according to Gary Kwan, a Vancouver-based vice-president at CTC Bank of Canada.

Commentary: Amendments are made on mutual agreement only and the trade relationship is based on mutual agreement.

Get letters of credit from reputable banks: "You are now relying on them to get paid. In China, there are a few banks that are well-established and widely accepted. If you go through a smaller one, insist that a bigger bank confirm the LC," said Kwan.

Commentary: There is no new development in this as this has always been the case.

Do everything you can to make sure documents are completely in order – the simpler, the better. "From the buyer's position, the tougher the conditions, the stronger their position," said Kwan. "On the other hand, for the seller, the more straightforward, the more favourable."Exporters are already getting the message.

Commentary: These have always been the principles of good international contracts as one should never sign anything that is not mutually understood or agreed to.

"You always have to be perfect with LCs in order to be paid. But what you have right now is that you have to be more than perfect because if there is a way for the customer to say, 'I don't want to pick up these documents,' it could be as minor as centre spelled as center, e-r not r-e," said Ken Grenier, co-owner of New Westminster North Rim Pulp and Paper, a year-old business that trades pulp.

Commentary: In that case find new customers.

Tracey Orr, who heads a Vancouver-based trade finance department at a major bank, put it this way: "What is old is new again. Letters of credit have officially been around for 70 years, with a uniform rulebook that is published out of Paris by the International Chamber of Commerce. There are revisions every 10 years, and it was last revised in July 2007.

"This cleared up a lot of the frivolous discrepancies, and we haven't seen many issues under these revised rules. Now [with tightened credit], what we are seeing is that you have got to pay attention to the rule book. Common sense. Dot your i's. Cross your t's. It doesn't matter what country you are in in the world, we are back to basics of international trade finance."

Commentary: Spelling counts!

Seoul struggles to silence crisis talk

The Times
November 11, 2008

Seoul struggles to silence crisis talk
Leo Lewis in Seoul

In a desperate attempt to shore up public confidence in its failing economy, the South Korean Government has moved to a “wartime” footing last seen in the days of the Asian financial crisis of 1997.

Commentary: As I remember it President Kim Young Sam overwhelmingly blamed ajoshis and adjummas for the crisis, taking too many holidays abroad and sending their children to too many foreign schools. Korean banks were noticeably absent from his trial without jury attributions.

As economists at the LG Economic Research Institute in Seoul told local media that the country was vulnerable to economy-led trauma, adding that a significant drop in GDP growth would “invite a surge in suicides and divorces”, the Government tried to reassure the public that South Korea's banks and large companies were in a much better state than they were a decade ago, backed by a prodigious stash of foreign reserves.

Commentary: We can only hope that most of those suicides kill themselves first? That prodigious stash is dwindling by the day though luckily not at GM's pressure bleed rates.

Public recollections of the Asian slump of a decade ago are still raw and Koreans are jittery at any sign of history repeating itself, reopening the country's deepest wound.

Commentary: Korea's deepest wound: to be found in debt and beyond its own national control.

President Lee reiterated the claim: “Right now,” he said, “the situation is fundamentally different ... and I can tell you for a fact: Korea will not have another financial crisis.”

Commentary: What kind of crisis is Korea having at this time?

Yet the Government's efforts may be overwhelmed by events: the country's banking system is beginning to look increasingly fragile, its credit bubble is at risk of deflating uncomfortably fast, the reserves are shrinking quickly and economists have started to downgrade South Korea's growth prospects.

Commentary: In times of downgrading of "the golden straight-jacket" promises mean nothing and only remedial actions which lead to foreign investor confidence are required. Now what are the best policies to put in place? Or does Korea have a crisis of reputation to deal with?

Seoul is also faced with challenges beyond its control: consumers in the United States are buying fewer electronics and cars; and the global shipbuilding industry, in which South Korea excels, is at risk from order cancellations as shipping rates plunge.

Commentary: Is it realistic to blame foreign customers in the USA for Korea's banking and credit bubble woes when in fact, the reason they are incapable of buying Korean products at this time is because they are: over-leveraged, under-capitalized, asset-poor, in bankruptcy and possibly unemployed all virtually at the same time?

Analysts at UBS believe that growth in South Korea will slow to 1.1 per cent in 2009, which would mark only the third time since the nation began to industrialise in the 1950s that its growth rate has sunk below 3 per cent.

Commentary: How reliable are UBS reports at this time? "The U.S. tax investigation risks compounding damage to UBS's reputation at a time it has been forced to make bigger writedowns than any other European bank in the credit crisis." Indictments possible in UBS inquiry: report

Added to the Government's headache is the very high level of private sector debt, which hit 180 per cent of GDP in the second quarter of this year and is higher than in America. That debt, analysts say, is going to start to unwind soon because of slowing employment and wage growth. Capital adequacy ratios at Korea's largest banks are also under closer scrutiny as they dwindle towards recommended minimum levels.

Commentary: President Roh appears to have perhaps spent more government money than nearly all previous heads of state combined?

Jae Ha Park, of the Korea Institute of Finance, argued that at the heart of the psychological battle were South Korea's large foreign reserves, which stand at $212 billion (£135.8 billion). That is $27 billion lower than they were a month ago, but still among the largest in the world. He said that they were a carefully positioned psychological tool to persuade the public that the country would not run out of dollars again.

Commentary: Why did the central bank wait over a year to adjust interest rates? Why has the monetary policy appeared piecemeal? What rates of repurchase of those US dollars have been represented by Korean banks attempting to shore up their own local reserves while depressing the won further every time the central bank releases a palette?

When the Asian financial crisis broke, ordinary Koreans could not understand how their country, which appeared to be highly prosperous, could suddenly run out of foreign currency. In astonishing scenes, Koreans rallied round, selling their gold and jewellery to help with the national drive to raise dollars. When the IMF stepped in to rescue the situation, it dealt a massive blow to national pride.

Commentary: How much of Korea's IMF-led reforms policy was lip-service to the debt and how much of Korea's national pride over IMF dictates affect Koreans interpretation of contract consideration? How many Korean companies have fully transparent accounting procedures? Korea's latest credit rating downgrade should have been forseen and is dependent on foreign investor confidence. The FDI flight has been/had been taking place a long time prior to the US mortgage crisis. What should be done, who should come forward with transparent business practices and how should leaders ameliorate Korea's seeming toxicity to the global financial world? Are former Enron executives roaming around on presidential pardons?

In a severe knock yesterday to the Government's efforts to talk-up the country's underlying financial health, Fitch, the ratings agency, downgraded its outlook for South Korea from “stable” to “negative”.

Commentary: Talk is cheap. Let's see financial reforms that separate the wheat from the chafe. Let's see Korea's financial and leadership really walk the global walk which attracts and increases foreign investment and reassures and calms said investors. Would this be the walk?

DHL to cut 9,500 jobs and close US service centers

AP
DHL to cut 9,500 jobs and close US service centers
Monday November 10, 2:27 pm ET
By Harry R. Weber and Samantha Bomkamp, AP Business Writers
DHL to cut 9,500 jobs and close US service centers, Deutsche Post announces


ATLANTA (AP) -- In a move that could greatly scale back a possible venture between UPS and Deutsche Post's DHL, the German company said Monday it will significantly reduce its air and ground operations in the U.S. and cut 9,500 jobs within the country.

The DHL-UPS deal was expected to last up to 10 years and infuse Atlanta-based UPS with up to $1 billion in annual revenue, if completed as first proposed in May.

UPS, the world's largest shipping carrier, has said the contract with DHL, which it has been working to finalize, would mostly involve the transport of DHL packages between airports in North America -- not the pickup or delivery of DHL packages to customers.

If DHL made significant cuts to its ground operations in the U.S., it wouldn't necessarily affect UPS and DHL reaching a deal since their talks have solely involved air delivery of packages, not ground delivery. But Deutsche Post's announcement Monday went well beyond the elimination of ground products within the U.S. Deutsche Post said it will discontinue U.S. domestic-only air and ground products on Jan. 30 to focus entirely on its international offering.

Deutsche Post, which cited heavy losses and fierce competition for its decision to curtail U.S. operations, noted it is not pulling out of the market entirely. It said its international shipping services to and from the U.S. would continue.

DHL competes with rivals UPS and Memphis, Tenn.-based FedEx Corp.

UPS spokesman Norman Black said his company would continue to work on an air-haul vendor contract with DHL. But, he added, "Today's announcement by DHL certainly could affect the size and scope of that contract. We'll go back into talks and see what develops."

Black cited the part of the Deutsche Post announcement in which it said it plans to stop offering air service between U.S. cities.

"By stopping that service, the only thing that's left is moving international packages once they get to the U.S. border," Black said. "That's a dramatically lower amount of volume than what they were originally talking to us about."

Currently, the company's total air volume for shipments from points between U.S. and international destinations and between points within the U.S. is about 1.2 million shipments a day. Deutsche Post said that figure will drop to about 100,000 shipments a day after the changes go through. The air volume figures do not include packages that do not start or end in the U.S.

Avondale Partners analyst Donald Broughton noted that while DHL's announcement does not directly kill the deal with UPS, he thinks termination will be an end result.

"I think a lot of observers, myself included, knew the largest value of that contract (between DHL and UPS) was going to be on the first day, and it was going to dwindle very quickly thereafter," Broughton said. "This just accelerates that process."

Edward Jones analyst Dan Ortwerth said Deutsche Post's decision changes the scope of a potential DHL-UPS deal, but doesn't necessarily kill it.

"I don't see any motivation for UPS to outright walk away," Ortwerth said. "UPS is in the stronger position, and I'm sure at the bargaining table they will protect their own interests plenty well."

Broughton said that while both UPS and FedEx stand to gain as DHL pulls back its U.S. service offering, FedEx will likely have the upper hand in gaining a broader share of the market in both domestic ground and air express shipments.

The analyst notes that FedEx has a ground network roughly one-third the size of UPS, which will allow it to grow business incrementally compared to its chief rival if both companies share the new business equally.

And FedEx's extensive air network will allow it to more easily expand and take more business, he said.

DHL's air and ground operations produced $3.4 billion in revenue last year.

"This a nice piece of the market for UPS and FedEx to play jump ball with," he said. "Overall this environment is very challenging, and this has been a positive in a sea of negative."

But although there are major near-term advantages, Broughton said the biggest benefits might be seen in the long run.

"The real upside might be two, three or four years down the road, when the economy is feeling better and FedEx and UPS are able to raise prices, because they won't have another competitor nipping at their heels," he said.

DHL's current vendors for air shipments within the U.S., ABX Air and ASTAR Air Cargo, have been opposed to the DHL-UPS deal, saying it would cost thousands of jobs if it went through. Now, given the extent of Deutsche Post's announcement, many jobs could be lost at the two companies even if the DHL-UPS deal isn't completed.

ABX spokeswoman Beth Huber said the decision will affect ABX' work force and operations. Just how much of an impact has yet to be determined, she said. ABX has about 7,000 employees.

A woman who answered the phone at ASTAR's offices declined to comment or take a message for a spokesperson, referring calls to DHL instead.

FedEx said in a statement that it welcomes the opportunity to pick up some of the U.S. business that DHL is exiting. "Global shippers have told us they are looking for unparalleled global reach, and FedEx is the global leader in express transportation," FedEx said. Black said UPS over the last several months has won the business of a number of former DHL customers. He said UPS expects to continue to be able to do that in the future.

Deutsche Post, based in Bonn, Germany, said the new round of job cuts are on top of another 5,400 job cuts it already announced.

The DHL Express unit currently employs some 18,000 workers. Deutsche Post said its other operations in the U.S., including freight and global mail and other logistics, won't be affected by its decision to close all of its U.S. ground hubs and reduce the number of stations from 412 to 103 across the U.S. The company said all international shipments into the U.S. will still be delivered, while 99 percent of the outbound shipments will be picked up.

The decision was announced as Deutsche Post said its third-quarter net profit more than doubled to 805 million euros ($1 billion) compared with 350 million euros a year earlier. Sales rose 4.1 percent to nearly 14 billion euros ($18 billion).

Deutsche Post investors cheered the decision, sending the company's shares up 7 percent to 10 euros ($12.90) in Frankfurt trading. In afternoon U.S. trading, UPS shares rose $1.95, or 3.8 percent, to $53.87, while FedEx shares rose $1.55, or 2.4 percent, to $66.13.

Commentary: I am told this kind of market withdrawal, which looks like a house-cat drawing its claws around its bed due to sudden drafts will be much more common in the months to come.

Fitch lowers credit outlook on emerging economies

AP
Fitch lowers credit outlook on emerging economies
Monday November 10, 6:50 am ET
By Kelly Olsen, AP Business Writer
Fitch Ratings lowers credit outlooks on 6 emerging economies amid financial crunch

SEOUL, South Korea (AP) -- Fitch Ratings on Monday lowered the sovereign credit rating outlooks for six emerging market economies to reflect higher risks to creditworthiness stemming from the global financial crisis and economic slowdown.

The outlooks on the long-term foreign currency ratings for South Korea, Mexico, Russia and South Africa, were revised down to "negative" from "stable," Fitch, one of the three major international credit ratings agencies, said in a release. A negative outlook means there is a greater chance of the actual credit rating being downgraded.

Outlooks on Chile and Malaysia, meanwhile, were lowered to "stable" from "positive," the agency said.

South Korea's A+ rating is four notches below Fitch's highest of AAA and six notches above "speculative" grade, generally regarded as "junk."

Russia, Mexico and South Africa are all rated BBB+, three levels above "speculative." Chile is at A, and Malaysia is at A-.

"The profound shift in the global economic and financial outlook pose significant real economy and policy challenges for emerging markets," David Riley, head of Fitch's Global Sovereign Ratings Group, said in a statement.

Riley said that policymakers in emerging economies have less room for mistakes than their counterparts in advanced countries, though are in a better position to deal with the current challenges than at any time in the past.

"Nonetheless, the risks of economic and financial stress that could undermine sovereign creditworthiness have risen and that is reflected in the prospective ratings actions taken today," he said.

Fitch said the action followed a global review of the ratings of 17 major emerging market economies carried out "in response to the profound deterioration in the global economic and financial outlook."

Bulgaria, Kazakhstan, Hungary and Romania had their credit ratings downgraded by Fitch.

Brazil, China, India, Peru, Poland, Taiwan and Thailand had their ratings affirmed.

The agency said that contagion from the global financial crisis in advanced economies "triggered extreme volatility in emerging market asset prices" and caused "liquidity strains."

Foreign investors have fled emerging markets in droves during the crisis, cashing out of stock markets and sending funds back to their home economies and currencies.

Fitch praised the response to the crisis by international financial authorities including the U.S. Federal Reserve, the European Central Bank, the European Union and the International Monetary Fund.

"In large part due to the impressive speed and scale of the response ... the risk that the financial market crisis would spiral into a broader economic and sovereign credit crisis has significantly eased," Fitch said.

In South Korea's case, Fitch expressed concerns that government support for the country's banks amid the credit crisis could undermine its external credit and foreign exchange reserve position.

South Korean banks and companies have struggled to secure U.S. dollars needed to meet foreign currency debt obligations as international lending has dried up amid the global credit crunch.

For Malaysia, Fitch said it considered the likely impact on the country's balance of payments from lower oil and other commodity prices along with weaker demand for electronics exports.

"Malaysia is one of Asia's more open economies and the region's only significant net oil exporter," Fitch said.

Commentary: This is Fitch's vote of non-confidence in the Korean Government's current strategies and reform plans which appear too little too late as the fox has already left the chicken coop? On the brighter side there is a long way to go to junk status.

Key Export Items to See Sales Drop

NOVEMBER 08, 2008 09:16

Key Export Items to See Sales Drop
Dong A Ilbo

As the global financial crisis has spread to the real economy, the biggest challenge facing Korea is an export slowdown.

Back in 1998, when Korea faced a severe currency crisis, the country overcame its difficulties since most economies save a few Asian nations enjoyed an economic boom. Korea, however, cannot expect exports to help it out of economic difficulty this time, as developing markets such as China and India as well as advanced economies are slowing down.

Commentary: China and India have proven real growth sectors for Korean products in the last decade and recent 40% drops in BRIC funds values indicates precipitous plunge in Indian and Chinese purchases may soon follow.

Undeniably, all industries will suffer from falling exports. Most of all, industries that are heavily dependent on exports to developed economies are likely to see a significant setback since developed economies are being affected by a real economy slowdown.

Commentary: It stands to reason that China and India will provide greater net downturns in export volumes.

The Knowledge Economy Ministry said Korea’s exports to Europe last month declined 8.2 percent from the previous year, in stark contrast to its year-on-year growth rate of 23.7 percent in October last year. Similarly, the year-on-year growth rate in trade with other economies including that of the United States (32.6 percent to 10.8 percent), and Japan (nine percent to 5.5 percent) has also rapidly decreased.

Korea posted a double-digit export growth rate last month thanks to the weakening won and surging demand in developing economies such as the Middle East and Latin America. Export growth, however, is not expected to surpass 10 percent next year.

Commentary: Some expect it to fall to about 1% growth next year.

Samsung Economic Research Institute said exports will grow 8.3 percent and LG Economic Research Institute predicted 8.9 percent. Given depressed economic sentiment in developed economies, however, the forecasts could see further downward adjustment.

Commentary: The sooner the better as research indicates positive thinking is more well engendered under forecast terms of market realism.

The durable goods industry will be the first to suffer. When economic conditions worsen, consumption of durable goods such as cars and electronics goods is the first to suffer. People tend to use durable goods for a longer period and hesitate to buy new ones in times of difficulty.

Commentary: Therefore former employees of Big Three car makers might best be retrained as auto repair specialists?

LG said American consumption of cars, electronics goods and audiovisual devices decreased three times faster than that of other goods when the United States suffered an oil shock in the late 1970s.

Yoon Se-uk, head of research at Meritz Securities, said, “As the car, IT and shipbuilding industries are most directly affected by the economic slowdown in developed economies, they will have more difficulty than other sectors.” The European market has seen falling sales.

Commentary: Lloyds claims shipping and ship production is floored with over five times required capacity in production orders for the next five years



Korea’s electronics industry, whose sales surged this year due to the weakening won and the Beijing Olympics, is unlikely to enjoy similar success next year.

The downturn in the car and shipbuilding sectors has also resulted in falling demand for steel. Steel production volume has increased but dropping demand has resulted in lower prices of most steel products.

Commnentary: Korean steel fabricators probably share similar concerns as shown in the graph below?

(The Fabricator)

The shipbuilding industry is also suffering. As the financial crisis has spread, ship owners have faced financing difficulties. Worse, the sector, which had enjoyed surging demand in recent years, will experience a sharp decrease in new orders soon. Most new orders, however, will go to Korean shipbuilders when economic difficulties deepen.

Commentary: Safe bet to say virtually any Korean comapny accustomed to easy credit terms in the last decade since "The IMF Crisis" is feeling financing difficulties?

IT sectors such as semiconductors and wireless communications devices will also see a sharp downturn. Semiconductor exports have fallen for four consecutive months due to falling prices resulting from oversupply, and are expected to face a prolonged slowdown. Exactly when semiconductor prices will rise again is unknown.

Commentary: Over-reliance on these two industries has been often commented upon and is the sticking point of moving Korea's industrial export dominated economic model towards an innovations led economy. Any suggestions and /or plans for this?

Demand for semiconductors is likely to fall significantly. Ju Dae-yeong of the Korea Institute for Industrial Economics and Trade said, “Since semiconductors are a kind of intermediate goods used to make electronics goods, personal computers and mobile phones, demand for semiconductors will fall when demand for consumer goods decreases.”

Exports of wireless communication devices such as mobile phones will slightly decrease. Industry experts say they will also be affected by economic conditions but demand for those devices will not fall significantly since Korea’s mobile device manufacturers have diversified their export markets. They have exported high-end goods to advanced economies, mid- and low-priced devices to developing economies, and parts of wireless communications devices to China.

Commentary: There still appears to be the expectation that developed economies are the root causes and singular affected parties at this time. Many opinions suggest that the global fallout in world trade will be significant reduction in developing economies trade.

The petrochemical industry is sensitive to economic conditions. Korea mostly produces petrochemical goods in China and exports to developed economies. Given that, China’s economic slowdown will inevitably deal a serious blow to Korean petrochemical companies. Samsung Economic Research Institute director Kim Jae-yoon said, “Since many Korean companies first export their goods to China and later to the U.S., most Korean industries will be influenced by the economic slowdown in advanced economies.”

Commentary: Again this admission is a good one and how large is the percentage of those goods? I would reckon up to 75% of Korean trans-shipments to China are destined for developed markets.

Korea’s textile exporters, however, could see a surge in profits this year given the weak won. Textile exports are likely to fall next year, however, due to weakening demand. Korea’s textile and clothing producers have avoided the negative influence of the economic slowdown since they have mostly sold low-priced goods to large-scale discount stores, but could suffer from falling demand when the global economy worsens.

Commentary: These textile producers are also facing stiffer competition from nations like India, China and Sri Lanka. It would be over-optimistic to expect Korean textiles to out-price these other nations.

13 Foreign Airlines Pull Out of Korea

11-07-2008

13 Foreign Airlines Pull Out of Korea

By Kim Hyun-cheol
Staff Reporter

The cold spell hitting the global economy is also bringing chills to the airline industry, as with financial pressure intensifying, foreign carriers have begun suspending flights to Korea, government officials said Friday.

Since the last week of October, when winter schedules began for most airlines, a total of 13 foreign companies have not requested the renewal of services on their routes, said an official of the Ministry of Land, Transport and Maritime Affairs (MLTMA). Seven, however, have opened new routes.

The official said both cargo and passenger volume from other countries started to lag behind that of the previous year from June.

Atlas Air, a leading U.S. cargo carrier, and American carrier Kalitta Air, no longer offer services, while two Russian airlines, Russian Sky and Khabarovsk Airlines, have pulled their Korean routes. Three Taiwanese-based companies, including the bankrupt Far Eastern Air Transport, are also no longer servicing Korean routes. Mandarin Airlines of Taiwan, however, is planning to resume flights next month.

On the positive side, Japanese and Chinese airlines are augmenting flights for tourists who are taking advantage of the weaker won.

Chinese-based Great Wall Airlines and China Cargo Airlines started services between the two countries.

Japan Airlines arranged 443 flights in total for its winter timetable, up 21 from last year. JP Express, a Tokyo-based cargo airline, also launched new flights starting this month.

The load factor (passenger occupancy rates) from Japan has gone up 10 percent since last month, as the Japanese yen has jumped nearly 40 percent against the won. The number of Japanese visitors surpassed 200,000 in September, up 4.8 percent year-on-year.

With many carriers rearranging their routes because of falling demand for cargo, a rebound in inbound flights is not likely to happen soon, industry watchers said.

Meanwhile, the ministry was cautious to link the downturn trend directly to the current economic slump.

``Some flight withdrawals are normal for this time of year, a relatively slack season for tourism,'' said Park Jeong-gon, an assistant director of international air transport at the MLTMA.

Currently, 61 overseas carriers from 27 countries are using Korean airports.

hckim@koreatimes.co.kr

Commentary: If Chinese and Japanese tourists can be drawn as export income due to a weaker won than the hypothetical argument may also be made that a weak won is good for Korean exports overall. For regional buyers looking for value priced goods demand might increase enough to meet Government export goals for 2009?

Shipments of food, energy are slowing

Shipments of food, energy are slowing
By SAMANTHA BOMKAMP

NEW YORK — The growing financial crisis is constraining world trade with a jumbled mess of frozen credit that could mean shortages of food and energy supplies for some countries.

Shippers of dry bulk goods such as grain and coal worry that importers won’t be able to pay for the goods they receive. And while some anxious exporters hold on to their goods, rates to ship those goods have plummeted to 10-year lows. Some ship owners are even laying up their ships rather than operate at such low rates.

Jefferies & Co. analyst Douglas Mavrinac said while credit markets in general have stabilized somewhat in recent weeks, credit across the shipping industry still remains extremely tight. Some companies that buy goods transported by dry bulk ships — including power plants, steel producers and food makers — are not able to secure letters of credit to facilitate shipments of coal, iron ore and grain they need.

Mavrinac said most markets around the world will work through stockpiles of commodities on hand, including coal and grain. But he said food and energy shortages could be a problem next year, especially in developing countries, if lending does not ramp up and shipping activity continues to stagnate.

“It will take a few months, it’s definitely the worst-case scenario.” Mavrinac said. “Right now there are plenty of ships, but no cargoes.”

Rates for the biggest ships on the seas have plunged to an average of just $5,611 per day, compared with $166,377 a year ago. Some companies, however, have secured charter deals with customers that locked in higher rates.

“That doesn’t imply that global demand is slowing,” Mavrinac said. “It implies that global trade is stalling — ships are idling.”

Bill Gary, president of Oklahoma City-based Commodity Information Systems, noted that with the U.S. harvest season under way, supplies are surging and crops, such as grain, might sit in limbo if tight credit markets continue to prevent the free flow of exports.

As prices for their crops fall, he explained, farmers hold on to more of their crops as they wait for better prices as inventories decline.

Midwestern farmers appear to be confident they can get higher prices if they just keep their grain off the market long enough, said Rod Weinzierl, executive director of the Illinois Corn Growers Association. Farmers paid historically high prices for fertilizer and fuel to grow this year’s crop, and are not eager to sell at a loss.

Weinzierl, who farms 500 acres of corn and soybeans near Stanford, Ill., said local grain elevators are not full yet, so farmers are using up the storage capacity to wait out low prices.

“Right now, there is nothing really forcing farmers to sell, and at these prices they’re not going to,” he said. “The price is actually below production costs.”

Gary said even though the credit markets have eased up a bit, commodity shipments have slowed further as freight rates for drybulk ships continue to plunge.

“Things have gotten worse over the past couple of weeks,” he said. “Last week was probably the worst that we’ve seen.”

Gary noted that shipments of corn, grain and wheat have stalled as receivers of U.S. commodities still don’t trust letters of credit from many banks, if they can be secured at all.

U.S. corn “commitments,” which include corn already shipped and outstanding sales, have tumbled 40 percent from a year ago. Wheat commitments are down 29 percent.

If the credit markets do not right themselves soon, he said, grain exports could dwindle to some smaller Asian countries. Exports to Europe might also weaken if credit does not begin to flow more easily in the next month, he said.

But Gary Martin, president of the North American Grain Export Association, says the possibility of a global food shortage is overblown. The trade group represents public and private grain exporters, including Cargill Inc. and Archer Daniels Midland Co., as well as some farmer-owned cooperatives. A spokesman for ADM declined to comment, and representatives for Cargill deferred comment to NAGEA.

Martin said that while supplies are mounting in the United States as worldwide demand slows, any shipping delays are likely to be on an individual basis, and that credit issues are not a widespread problem for food transfers around the globe.

He noted that the United States has systems in place to prevent major disruptions in the supply chain — such as the USDA’s GSM-102 program, which guarantees credit for commercial financing of U.S. agricultural exports.

Commentary: Friends and students have been mentioning this new development for a few weeks now and this is the first article I have actually read in print. As a lot of my teaching hours are spent trying to explain international trade correspondance and the credit financing process it is a worrying decline in credit worthiness which could really impact Korean purchases abroad of raw materials and commodities essential to their export growth targets. It causes me to wonder if anyone beyond international trade students really understands the problem of stalled global trade due to banks suddenly scrutinizing every credit transaction with fine-toothed combs beyond the process itself to actual damage of business trading relationships. Such positional swings in terms of commodities; first the speculators starve the poor due to their profits and then the exporters starve their customers due to sudden fears over global credit worthiness when the prices tumble.

South Korea foreign reserves plunge as crisis bites

South Korea foreign reserves plunge as crisis bites

By Seo Eun-kyung and Yoo Choonsik

SEOUL (Reuters) - South Korea spent a record amount of its foreign exchange reserves in October to protect the won from the financial crisis and said a $4 billion currency swap deal with neighboring China would likely be expanded.

As the crisis bites, President Lee Myung-bak on Tuesday urged swift completion of the an $11 billion economic stimulus package announced the previous day and told government ministers to focus on reviving Asia's fourth-largest economy.

The economy ministry vowed to boost next year's exports by 15 percent, almost double the pace predicted by private sector analysts, by expanding financial support to local exporters and exploring markets for industrial plants.

Seoul stock prices jumped more than 2 percent on investor hopes the government's economic package would help keep the economy on track, but the won wiped out Monday's gain as the local short-term dollar-funding situation tightened.

Analysts said foreign exchange reserves turned out to have fallen more than expected but South Korea has now passed the worst point in terms of the foreign-currency liquidity squeeze.

"Earlier worries about it were already overblown," said Lim Ji-won, an economist at JPMorgan Chase, adding the worst was likely over.

Central bank data released on Tuesday showed South Korea's foreign reserves fell a record $27.4 billion during October to $212.25 billion at the end of the month, marking a record seventh consecutive monthly drop.

The Bank of Korea said authorities injected at least $12.7 billion to ease a dollar shortage in the country's money markets, as the crisis dried up dollar credits available to emerging-market countries.

SWAP LINE WITH CHINA

Much of the dollar injection was made on swap deals, meaning the reserves would eventually return when the deals expire.

To head off concern about declining foreign reserves, South Korea tied up a $30 billion bilateral currency swap line with the U.S. Federal Reserve last week and is seeking to expand an existing deal with China.

Vice Finance Minister Kim Dong-soo told reporters the two neighbors, which together hold foreign reserves of more than $2 trillion, have agreed in principle on expanding the arrangement first established under a regional initiative in the aftermath of the Asian financial crisis a decade ago.

Yonhap news agency reported the Bank of Korea has been talking to the People's Bank of China on opening a separate $10-30 billion reciprocal swap line.

But the Bank of Korea said in a statement that while it has proposed the arrangement, there have been no detailed talks.

It did not specifically say whether its proposal was for a separate facility to the existing arrangement which is part of a regional pool.

Kim also said South Korea had no plans to tap the International Monetary Fund for support as the dollar liquidity crunch was not serious enough. He said it could ask for up to $22 billion in support from the IMF in case of an emergency.

Analysts said once South Korea's giddy markets find their footing, the government would next need to steady the real economy, which is heavily dependent on exports.

The economy ministry came up quickly with an ambitious goal of boosting next year's exports by 15 percent to $500 billion, above the market's consensus of around $485 billion, and turning the trade balance into a surplus in 2009.

(Editing by Jonathan Thatcher & Jan Dahinten)

Commentary: Korea spent nearly as much this month as it did in 1997 prior to seeking/receiving IMF loans agreements. Is President Lee Myung Bak's new 12 billion stimulus coming from more high-cost money markets short-term margin loans? Does ordering people to focus on the problem include mediating solutions? The analytical divide in terms of predicting market growth appears political. Should exporters be supported by better export services, fewer documentary/regulatory requirements, revamped and reoriented FDI investment incentives programs similar to those in Thailand? How is JPMorgan Chase performing in terms of its merged and bought-out competitors? Is the IMF being avoided due to its perhaps renewed, revised and better informed agreement terms which perhaps appear political anathema to Koreans at this time? Should the IMF table or promote its regulatory agenda publicly prior to provision of future loans to encourage Korean politicians to listen to their own economists or those at the IMF? Are talks with China challenging due to positional agendas in both nations and negotiation styles which display difficulties in offering or accepting mutually beneficial concessions? Are ambitious expectations of 2009 growth coming at the expense of flexibility in market planning and current modifications of contradictory evidence? Does the Korean Government seek to revise its growth forecasts downward at the end of December?

$500 Billion Export Goal Set for Next Year

$500 Billion Export Goal Set for Next Year

The government has announced an all-out offensive to boost exports. Officials in a trade promotion meeting on Tuesday decided next year’s export target of US$500 billion and vowed to achieve a trade surplus.

Knowledge Economy Minister Lee Youn-ho said the government will increase export insurance funds designed to protect exporters from payment defaults in developing countries by W40 trillion (US$1=W1,288) next year from the present W130 trillion to W170 trillion. The Korea Trade-Investment Promotion Agency will guarantee products made by small and mid-sized businesses under the logo “KOTRA Guaranteed Brand.”

To boost the export competitiveness of Korean-made hybrid cars to be marketed from July next year, the government will exempt owners from consumption tax as well as acquisition and registration tax. People who buy hybrid cars will also be exempt from government bonds required by all automobile purchasers. An official at the Knowledge Economy Ministry said the tax breaks will lower the price of a hybrid car, estimated to range between W24 million to W30 million, by as much as W3.1 million.

The government also decided to cut tariffs on imported equipment to manufacture IT products, while allowing consortiums between large and small businesses to hire people who are exempt from active military service. The scope of exemptions on income tax for workers dispatched overseas will rise from the present W1 million to W1.5 million.

It remains to be seen whether the government’s plans can be realistically implemented. Korea’s exports this year are estimated at $445 billion, and outbound shipments would have to rise 11 to 12 percent to achieve the target. Major Korean economic think tanks have predicted outbound shipments to total around $480 billion, rising only around 8 percent next year. The Korea International Trade Association estimates $482.5 billion, up 8.6 percent, the Samsung Economic Research Institute $484.7 billion, up 8.3 percent, and the LG Economic Research Institute $486.7 billion, up 8.9 percent.

(englishnews@chosun.com )

Commentary: I saw this and suddenly KLF came to mind. Are vows enough? Homage to, "They're justified and they're ancient?" Perhaps if most consumers in Korea's major export markets simply trade down as Walmart's retail customer growth indicates many US buyers are doing. Tongue in cheek, is this "Moo Moo Land?"

Are they looking for currency reserves?

Are they looking for currency reserves?

Regarding the won: A lot of things are going wrong here all at the same time. Korea is a sandwich? Korean banks borrowed the money they lent to mortgage holders on open money markets with short-term high interest loans. Now those loans and interest rates are coming back to roost.

How do the Koreans feel about it? The Korean perspective appears to suggest that the fault of currency devaluation resides with foreign investors not understanding the Korean market and expressing their fears and uncertainties through FDI withdrawals as Luis Rangel at The Commodity Market Joural has suggested. This is a not unexpected local perspective.

This is an ultra-Confucian society of followers rather than leaders where the majority of investors rely upon real estate to provide the geese that lay golden eggs over the stock market which is perceived by many as gambling as 1997 provided the last largest example of fortune’s precipitated downturns. The government has swallowed up 150,000 unsold homes in an attempt to regulate housing prices which are falling. It may cost less to mail those keys home here as there are no fixed-term mortgage rates. They are re-negotiated annually.

These geese have been fed by local banks mortgage issuances on borrowed USDs from banks abroad with high credit interest rates and leveraged calls which pushed Korea into its last crisis. Luckily some of Korea’s creditors no longer exist? Is the world better off now with GM-Daewoo one of its few profit making subsidiaries?

The Korean reserves of won and USD have fallen nearly as far as they did during the 1997 currency crisis. Locals remember it as ,”The IMF Crisis” which makes the whole world look like an “IMF Crisis” at this time.

The sky is not falling -it fell. The fallout remains…?

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South Korean exports to suffer downturn next year: official says

South Korean exports to suffer downturn next year: official says
Qatar News Agency
Article Date: 09:24 2008/10/22

Seoul, October 22 (QNA) - The sluggish global economy is expected to cause a downturn in South Korean exports in the first half of 2009, a senior government policymaker said Wednesday. Knowledge Economy Minister Lee Youn-ho told a gathering of local businessmen in Seoul that the financial crisis, which was set off by the U.S. sub-prime mortgage rout and the collapse of Lehman Brothers Inc., is affecting growth worldwide. "Such developments are likely to affect exports, investment and local spending," he said in a statement carried by the South Korean /Yonhap/ News agency today. South Korea's exports posted solid double-digit gains throughout the year, with numbers topping $37.59 billion for an annual gain of 28.2 percent in September. Imports surged 45.8 percent that month to $39.65 billion for a deficit of $2.05 billion. The official said that the scale of the fallout will depend upon economic conditions in the United States and developing countries such as China. Developing economies account for over 60 percent of South Korean exports, while exports to the U.S. make up roughly 10 percent of the total. "The liquidity crunch being felt at present may lead to higher interest rates, which in turn will hurt corporate investment," Lee said. The minister said instability in the financial sector could also have negative consequences on foreign exchange rates. The policymaker stressed, however, that the country will be able to pull off a trade surplus in October and for the whole of the fourth quarter. He said the government is aiming to attract at least 12 billion in foreign direct investment by year's end. Reflecting the general slowdown, Seoul said that this year''s growth may dip to mid-4-percent levels from the 5 percent seen in 2007, with some experts predicting growth to fall to under 4 percent in the first half of next year.(qna) MD

Commentary: I would love to see full follow through and tracking on those Korean exports to developing economies which may indirectly represent value added exports to the USA? How much of those volumes are inter-Korean subsidiary traffic? Much of what is happening globally at this time appears to mirror what was happening in Korea in 1997. Which industries will demonstrate earliest signs of contraction? Will construction and ship-building be drastically affected and what kinds of bailout packages has the Korean government prepared in the event of possible chaebol melt-downs in 2009? In addition what methods will the Korean government be promoting to encourage 12 billion in FDI in the next two months?

Won soars 16.5 pct on currency swap deal

Won soars 16.5 pct on currency swap deal

SEOUL, Oct. 30 (Yonhap) -- The South Korean won spiked 16.5 percent against the dollar Thursday on a currency swap deal with the U.S., a bullish stock market and Seoul's decreased current account deficit, dealers said.

The local currency closed at 1,250 against the greenback, up 177 won from the previous session's close and the biggest daily gain since Dec. 26, 1997.

The currency, which plummeted to a more than ten year low of 1,495 won to the greenback, rallied as foreign exchange authorities accelerated moves to restore confidence in financial markets.

The Bank of Korea (BOK) said earlier in the day it has concluded a currency swap agreement of up to US$30 billion with the U.S. Fed, which will help stem the won's sharp decline against the dollar.

BOK Gov. Lee Seong-tae said the swap deal will help the local financial market and ease concerns about local banks' dollar shortage.

Finance Minister Kang Man-soo also said that the country is seeking to forge similar deals with Japan and China.

"The news will help market sentiment improve, and help ease concerns over a shortage of dollars at banks and local companies," said Kwon Woo-hyun, a currency dealer at Woori Bank. "But it will take time for the currency rate to stabilize due to continued foreign sell-offs of local stocks."

The local currency has lost more than 30 percent against the greenback so far this year, in large part due to the continued sell-offs of local stocks by foreign investors and concerns that local lenders are facing difficulties repaying short-term foreign debts.

A bullish run on the local stock market also helped the local currency gain against the greenback while a narrowed current account deficit reduced dollar demand, they said.

The won's sharp rise was also helped by a central bank report that the country's current account shortfall narrowed sharply to $1.22 billion in September, compared with a deficit of $4.7 billion the previous month.

South Korea has posted current account shortfalls for every month this year except May as oil prices and the won's tumble drove up the cost of imported goods.

A continued deficit raised concerns that declining dollar supplies will further put downward pressure on the local currency.

The bank forecast that the economy is likely to post a current account surplus of more than $1 billion in October as the trade balance swings to the black.

sam@yna.co.kr

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Sri Lanka recruiters visit Shawnee State University

Sri Lanka recruiters visit Shawnee State University
Wijeya Newspapers Ltd.

This summer, Priyanthi and Dissa Dissanayake, college recruiters to the United States from Sri Lanka, visited Shawnee State University for the first time to look at possibly sending students for their education.

More than 100 students have come to the United States from Sri Lanka for higher education since 2001 with the help of Priyanthi Dissanayake, who is recognized as Sri Lanka's foremost individual recruiter to colleges and universities in the U.S.

Her daughter, Sashi, wanted her higher education in the United States when she first started researching and after many rejections, she found a private college in Minnesota that worked with her. After that, her friends wanted help in sending their students to the United States.

"There had been very few Sri Lanka students coming to the United States for higher education before that," said John Lorentz, executive director of SSU's Center for International Programs and Activities. "They usually would go to Australia."

Lorentz has been involved with strategic planning in the state of Ohio with the Ohio International Council. One of the discussions of the group was determining how to promote education in Ohio, including promoting education abroad.

Shawnee State is also a founding member of the American International Recruitment Council, a new accrediting association for recruiters. The purpose of the organization is to develop standards of ethical practice to recruit international students to American educational institutions. Through his involvement in these organizations, Lorentz was introduced to the Dissanayakes.

"Last summer, we were introduced to Ohio," Dissa Dissanayake said. "We are visiting 16 schools in 10 days. What we have found is that Ohio offers so much diversity in schools for our students."

Until they came to Ohio, the Dissanayakes were working with about a dozen schools and now they have about 28 schools for their students.

"Having worked with so many schools in so many states, I see Ohio as one of the most forward-looking states where the international students are concerned," Dissa Dissanayake said. "From what we have seen, Shawnee State University has a lot to offer our students. We feel that students coming here would have a quality education."

In the next month, Lorentz will be traveling to Sri Lanka and Nepal for education exhibitions to introduce students to SSU.

"When you invite international students and you teach them a liberal arts education and the values of democracy, you pass on certain values to the future generations, the future leaders," Dissa Dissanayake said. "America has a lot to offer through its education to make the world a much safer place, a much better place. What I see here is that it goes far beyond educating individuals. This is the ultimate goal."

Visitors from Sri Lanka tour Shawnee State University to consider sending students. Contact: Elizabeth Blevins, Director, Office of Communications

Office: (740) 351-3810; FAX: (740) 351-3179; Cell: (740) 464-4854

Sourced: goswoop

S. Korea plans more measures

SEOUL - SOUTH Korea said on Monday it is planning measures to prop up the construction sector, after announcing a US$130 billion (S$191 billion) package to stabilise financial markets.

The government believes the fiscal measures announced on Sunday are sufficient, preemptive and decisive, said Deputy Minister of Strategy and Finance for International Affairs Shin Je-Yoon.

'And in order to help the real economy, the government plans to announce measures on Wednesday to support the construction sector and (at a future date announce) additional means to help small and medium-sized enterprises,' he told foreign correspondents.

The financial package was earlier welcomed by the International Monetary Fund, saying it should help foster confidence.

A statement by managing director Dominique Strauss-Kahn said Seoul's decision to guarantee up to US$100 billion in foreign borrowing by its banks will ease pressure in the local dollar funding market.

'While global financial conditions will likely remain unsettled for some time, the government's policy package should support confidence in the Korean financial system and return attention to Korea's solid macroeconomic fundamentals, including its sizeable foreign reserves,' the statement said.



Apart from the guarantee, the government also announced it will supply US$30 billion from foreign reserves as soon as possible to local banks and exporters to ease a dollar shortage which has been driving down the won.

Despite foreign reserves of almost US$240 billion, South Korea was seen as vulnerable to the current global turmoil because of a surge in short-term foreign borrowing by its banks over the past year as US interest rates fell.

The global credit crunch was complicating efforts to roll over those loans, causing a scramble for dollars and a plunge in the won's value.



Some US$80 billion in foreign currency borrowing is due to mature by next June.

The won rose against the dollar following Sunday's announcement. It closed at 1,315 won to the US unit, up 19 from Friday's close.

Shares ended 2.3 per cent higher on Monday as gains in Asian markets offset doubts over the effectiveness of the stabilisation measures.

The central bank chief said the economy is expected to grow slower next year amid difficulties at home and abroad, and the bank plans a monetary policy to prevent it from sharply weakening.

'There is a possibility that the growth of the South Korean economy will considerably slow down in 2009, but the economy is not expected to contract,' Lee Seong-Tae, governor of the Bank of Korea, told lawmakers during a parliamentary audit. -- AFP

Gulf Compensation Trends 2008

Gulf Compensation Trends 2008 (Download for free)

GulfTalent.com's fourth annual review of compensation trends:

Average pay rises by country and sector
Drivers of salary increases
Structural trends in employment
Outlook for 2009, including impact of global economic slowdown
Individual country analysis for UAE, Saudi Arabia, Kuwait, Qatar, Bahrain and Oman