Yesterday, the FTSE announced it will grant “developed” status to South Korea. The designation will become active September 2009. Congratulations, welcome to the club!
To be sure, Korea had been considered “developed” or “high-income” by other organizations before, including the World Bank and the IMF (but as of yet, not the CIA). However, recognition by the FTSE is important in that it is a benchmark used by many investment and financial groups to measure risk. Thus, the designation should, over time, increase the flow of investment into the country as well as improve its international credit rating.
Per the WSJ:
“The investment banks and investment-fund managers we’ve engaged with have gotten comfortable with the fact that South Korea should be a developed market,” said Mark Makepeace, chief executive of FTSE.
South Korea will become the 25th country to carry the developed-market designation from FTSE. It will be the 12th-largest of the developed markets, with total capitalization of $1.12 trillion as of the end of last year.
However, the designation of “developed” wasn’t without its caveats. Per Hugh Young, managing director of Aberdeen Asset Management Asia, a leading investor in the region:
“The South Korean government has made dramatic improvements to the stock market. However, we still rate the corporate governance of some companies in Korea as towards the lower end of the spectrum.” (Emphasis mine)
Indeed.
(HT to Linkd)
{ 22 comments… read them below or add one }
Damnit, that means my emerging markets fund will have to drop samsung.
But it will gain China Mobile…
Its nice to know I will now be able to walk the pavement in Seoul without having to worry about motorcycles.
Keep dreaming or swilling soju.
A few years ago, my customers — Korea’s University Libraries — would tell me “I know Korea is a developed country, but I still want to get the developing-tier pricing!” To which I’d answer that this kind of attitude reeked of Third World, maybe that’s the tier they should get.
Down on Korea!
The most tangible benefit of being from a developed country means having the means to visit someone in the mix and toss a few insults their way and having gaggles of school girls gather ’round and read it as wisdom.
Pathetic.
Stateside, the Feds are doling out billions of taxpayer money to bail out the banks. Also, the cost of rescuing Freddie and Fannie will 5 trillion. Those of us who never got mixed up in the sub-prime mortgage real estate market orgy of greed will have to pay for other people’s mistakes. Whatever happened to just letting the free market system sort things out on its own? Also, isn’t this precisely the sort of thing that Korea was told not to do during the IMF crisis?
But what really gets me is the fact that the rip-off barons are making off with millions even though the financial system is on the verge of a complete meltdown and thousands of rank-and-file people are being laid off. No one’s being held accountable. Almost makes one want to turn into a rabid socialist.
Warren Buffet made a statement 5 years ago concerning the financial instrument known as the derivative which now seems very prophetic. China should have invaded Wall Street on the basis that they were harboring “weapons of mass financial destruction” threatening the stability of the global economy.
Do you even know what a derivative is?
Rather, I would say that Korea is playing make-believe and pretending to be a “developed country.”
Well said, Mizar.
Do you even know what a derivative is?
A derivative, and I am paraphrasing now, is a security whose valuation is based upon other securities (such as bonds and other various forms of IOUs). Furthermore, the valuation of a derivative involves complicated mathematics similar to that found in theoretical physics. Ever heard of a Black-Sholes equation? That’s why derivatives are very complicated. A big part of the problem is that no one bothered asking Wall Street brokers and traders, who were dealing in all this, if they knew what a derivative was.
A derivative is not always a security. Without meaning to give offense, the fact that you state that off the bat tells me you don’t know what one is.
I have heard of a “Black Scholes Model” — I suppose it is complicated. So what? Lots of things are. Are you arguing that complicated=bad?
You, who I guarantee has never set foot in a dealing room, make a blanket statement that traders don’t know what they’re doing. Pretty hubristic, I’d say.
Not to mention that Berkshire Hathaway has made millions trading derivatives.
OK, then, why don’t YOU explain what a derivative is. Off the top of your head, like I did, without consulting google.
Easy, a derivative is simply a financial instrument transacted between two parties the price or value of which is “derived” from the price movement of an underlying asset.
Certified Google-free definition.
Now, tell me why they’re bad, instead of citing circa 2002 Warren Buffett, who since has profited handsomely from derivatives trading.
Well, it sounds like you are describing options and futures, which are only two kinds of derivatives.
The reason why derivatives are dangerous is because of the Butterfly Effect. Sensitive dependence on small initial conditions or changes. A butterfly flapping its wings in Mexico can translate into a hurricane in Florida. This analogy applies also to financial markets, which are as complicated as weather systems. Elaborate models are used to track the markets, just like the weather.
The thing about derivatives is that they are very risky due to high leverage. Small changes in underlying variables can produce huge fluctuations in value of the instrument. You can score huge wealth but it can also lead to catastrophic failure. No doubt Warren Buffet realized this when he compared them to weapons of mass destruction. This doesn’t mean however that you cannot profit from them if one knows what they are doing and exercise discipline and restraint. But unfortunately discipline and restraint are hardly the words to describe what happened.
Junk mortgages were sold to people who could not really afford them. People bought homes as investments and they were carrying multiple mortgages. During this real estate bubble, folks just assumed that home prices would just keep going up. The junk mortgages were repackaged as derivatives and were traded by brokers caught up in the latest, trendy fad. These derivatives contain lots of debt which were based some very poor fundamentals. This set up a general condition in the economy where, later, and convergence of other factors such as high oil prices, increasing consumer prices, job losses, and personal credit debt, precipitated the perfect storm that we now know as the sub-prime mortgage crisis.
But then again I’m not an economist. Maybe I’m just talking out of my layman’s ass.
Well, something’s gone wrong. I just am not buying blaming “derivatives” and the “butterfly effect” as root causes.
What went wrong was just that the world found itself with way too much money. US dollars, specifically. With America printing dollars like mad to pay for a war, while refusing to implement any sort of austerity measures at home – in fact, INCREASING domestic consumption while fighting a war (I think that’s unprecedented in human history?) – the world’s investment banks, fund managers, oil princes, Latin American socialismos, Russian oligarchs and Chinese banks etc found themselves with a problem – hundreds of billions of dollars and no place left to put them.
The subprime CDOs were a willing self-deception for all parties. Everyone needed to show a return on investment, most people knew the mortgage CDOs were much riskier than the corrupted ratings agencies said they were, but there was too much money in the auction – prices kept going up, the customers demanded more product from the investment banks, so the IBs demanded more mortgages from the retail banks, the retail banks willingly responded with increasingly ridiculous mortgages to people who couldn’t afford them, and builders kept throwing up houses, because, after all, you need SOMETHING to base it all on.
If you net it all out so far, America’s stock market has lost about $4trillion in value – is that about the cost of the war? Wouldn’t it be interesting if the two numbers were pretty close? Wars must be paid for, whether you pretend that freedom fighting is free or not.
I could go on about why this another reason NOT to vote for McCain – but I’m sure there will be another thread for that.
Do Dogbertt and Netizen Kim have history?
Chill out dudes.
The S.Koreans would have achieved this years ago if they hadn’t elected neo-liberals and their anti-capitalist policies.
A huge problem right now are derivatives which allow speculators to fulfill their own downward prophecy. So yes they are dangerous but its similar in nature to the gun debate.
I think that the FTSE have designated Korea’s stock market as developed – not Korea itself. The FTSE determines the quality of the stock market on such factors as openness to foreign institutions, size, liquidity, types of products available, restrictions on investment, etc. It doesn’t relate directly to the state of development of the country or economy.
The president has control over the regulations of the stock market. Roh should done what LMB is doing 5 years ago.
I’m not sure if your clueless or an idiot in capable of critical thought.
The president has control over the regulations of the stock market. Roh should done what LMB is doing 5 years ago.
I’m not sure if your clueless or an idiot in capable of critical thought.
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