A presidential aide claimed that negative reports on the Korean economy by conservative newspapers and opposition parties was fattening the pockets of foreigners by giving them control of Korean blue chips [Korea Times].
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14 Comments
Wow, what a badly written article. Anyway, that analysis is wrong on many levels–foreigners invested more in blue chips than locals because Samsung and Hyundai are now global brands, and locals have shied from the market in favor of perceived higher returns from real estate.
This is more of the shrill “foreigners are taking our money” nonsense that shows ignorance of basic capitalism and is scare-mongering. This idiot Lee Seung-woo should be thankful that there is investment interest in the S.K. market by non-Koreans or there would be a lot less capital for Korean companies. Frogs croaking from the well again.
Not that I expect Pres. Roh’s aides to make rational and logical statements(remember FM Song Min-soon?), but if Lee Seung-woo had the time to sit with a Korea Times reporter and whine about the GNP, the conservative newspapers, and foreign investors, then maybe he has the time to sit with a business school professor and relearn the basics of capitalism and foreign investments.
Korean stocks were also previously undervalued and foreign investors have begun to take notice:
http://www.marketwatch.com/new.....E942F14%7D
Truth is, Korean investors had limited options before the overseas investment cap was lifted and saw apartment ownership rather than stocks as the road to riches–hence the “Dutch tulip moment” in real estate now.
Projection.
Years ago, prior to an election, a mid-level stock would spike dramatically. Brokers urging the masses to buy. Newspapers running stories about the bright prospects. Then the price would collapse. Profits pocketed by the ruling party to finance the election.
A major incentive for foreigners to buy Korean stocks is not just the performance of the companies themselves. It is done due to the GUARANTEED profit to be made on the rising won. The profit is guaranteed because the government here is stupid enough to spend bilions of taxpayers dollars to try to supress the currency. Effectively the Korean taxpayer is subsidising foreigners, by making Korean assets cheaper. Everyone one knows that Governments can’t keep manipulating currencies forever, as by doing so they are working against natural market forces. Eventually the government runs out of money, gives up and pow the currency moves big time, so handing the foreign investors a huge profit. This is how George Soros made a fortune when he broke the Bank of England. I guess the governor of the BoK thinks he’s smarter than the market.
the year is 2007. No, not 1987. 2007. What?
The KBS tv news still differs significantly from the newspapers?
In South Korea, you get this interesting phenomenon of getting a different news from the tube vs the paper.
In a way, it’s very retro, something the military govt savored. Using the telly to tell people what they should think.
On the other hand, I’m beginning to judge Roh Moo Hyun in a different light.
He’s not as bad a President as he was made out to be by the papers.
In the end, he did the FTA, he changed society better for the layman, and he was willing to not only cross paths with enemies but even his supporting base to do what he thought was right.
I think that’s commendable.
Austin, good point. If I was better at playing the market I’d do exactly the same.
@Austin, are you saying the BOK is wasting money suppressing the Korean Won, and that foreign investors are set to make a killing when there is a correction and the Won skyrockets in value, whereby said foreign investors make a killing when the foreign currency value of their Korean investment drops?
If so,good point. If I was better at playing the market I’d do exactly the same.
It’s not a total waste of money, but it is an unfortunate Catch 22 for Asia’s central banks. Korea’s exporters mostly get paid in USD, but their production costs are mostly in KRW. If, after selling their products, they bring their money home to Korea and then only get 870 won to a dollar rather than 930, then they aren’t profitable. Since the present 930 is already uncomforatable, Korean companies are opening up factories in China and Vietnam just as fast as they can.
All of Asia’s manufacturers are buying dollars to keep their currencies weak so that they can compete against each other, and also, to keep financing America’s huge deficit, so that Amerian consumers can keep buying Asia’s output.
If Asia stops supporting lending to the US, and lets its currencies appreciate, then the very backbone of global trade will be broken.
Problem is, people like Soros know that Asia can’t keep piling up USD reserves at a rate of 800billion per year without an eventual dollar weakening (whether by crash or managed descent). So they spend (actually, borrow - it’s called leverage) a dollar to buy 930 won, knowing that eventually they’ll be able to spend 870 won to buy back a dollar. Profit 60 won, minus interest on the dollar loan. Soros didn’t break the bank of England, the BOE broke itself. Soros just saw a mismatch in value between pound and deutschmark, and chose to profit from it.
I don’t think today’s markets are any place to play. Everything is overvalued, as you well know. It’s a good time to hold onto a nice strong currency like the KRW, wait for a dollar decline and a Dow drop, then buy into the US market.
They want foreigners’ money, but don’t want to give them any control. It still works that way, even after they take the money, as many of the chaebol have figured out ways to retain control with a fraction of the shareholdings. What they really need here is more shareholder rights for minority shareholders.
Oops, that last sentence didn’t come out quite right. Chaebol owners are minority shareholders, but…well, you know what I mean.
much more of the financial assets in korea will be managed by foreign hands in the next few years. the capital market integration act and the capital market consolidation act will make sure of it. and then there is always the rumor that hedge fund operation will get the green light in the not too distant future.
of course, if they make too much profit managing the assets of the good people of korea…
South Korea is extremely well integrated into the global economy, and arguably a more responsible member of said community of nations than those that are in a position to play fairly. What is so wrong with a sovereign nation trying to get ahead on behalf of its constituents? What’s good for the goose…
“What is so wrong with a sovereign nation trying to get ahead on behalf of its constituents?”
dlatn, I can’t really see what this has to do with foreign holdings of Korean companies. Not allowing foreigners to gain control of Korean companies could do more harm to Korean interests in the long run (discourages inflows of capital). Is it good for Korea to have home-grown yet poorly run companies?