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   Strategies & Market TrendsKorea

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From: Sam Citron5/23/2008 8:43:16 AM
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Korea's Nexon Bets On Sales of Virtual Gear For Free Online Games [wsj]
May 23, 2008; Page B1

The online game company Nexon Holdings Co. has won legions of fans on its home turf in South Korea. The company estimates nearly a third of the country's population of more than 49 million has played Kart Rider, an addictive, anime-style online racing game from Nexon that allows youngsters to customize their vehicles and chat with friends.

Now Nexon is making a bigger play for gamers in North America, bringing with it an innovative approach to making money that U.S.-based game makers like Electronic Arts Inc. are scrambling to emulate.
Nexon Holdings
Nexon will release its 'Sugar Rush' game in North America.

Unlike the traditional approach, Nexon makes its games free to download to personal computers and to play. The company makes money by charging customers anywhere from 30 cents to $25 each for virtual "items" to enhance their game experiences, including everything from souped-up vehicles to wacky hairstyles for in-game characters. Later this year, Seoul-based Nexon will release its first game created in North America, Sugar Rush, in an attempt to further boost its local appeal.

The in-game purchases add up to a big, fast-growing business. Prepaid cards used to buy Nexon game items are now the second best-selling entertainment gift card at Target Corp. stores in the U.S., after cards for Apple Inc.'s iTunes Store, Target says.

Closely held Nexon says it had a $75 million profit on $230 million in revenue in 2005, the most recent year for which the company has released its global sales. That's up from a $35 million profit on $110 million in revenue the prior year. By comparison, EA, the largest world-wide game publisher by sales, posted a $236 million profit on revenue of $2.95 billion for the fiscal year ended March 31, 2006.

Nexon declines to say whether it has plans for an initial public offering. Interest in videogames has intensified with the runaway sales success of Grand Theft Auto IV launched last month by Take-Two Interactive Software Inc. (Please see related article on page C2.)

Nexon's biggest hit in the U.S. so far is MapleStory, an online role-playing game popular with teenagers in which players assume the identities of warriors, magicians and thieves and collectively fight monsters. The game has 85 million users globally, of which 5.9 million are registered in the U.S. Last year players world-wide bought more than 1.3 million articles of clothing and more than one million hair makeovers for their MapleStory characters. Nexon's U.S. revenue last year more than tripled to $29.3 million from $8.5 million the prior year.

Socializing with other users is a big part of the appeal of Nexon games, which is why players are willing to fork over real money for in-game status symbols. In MapleStory, players can pay between $20 and $29 to marry their avatars to each other in elaborate ceremonies attended by other in-game buddies, including a Las Vegas-style bash officiated by an Elvis Presley impersonator.

"These games are as much Facebook as they are raw videogames," says Evan Wilson, an analyst at Pacific Crest Securities in Portland, Ore. "There's a network effect -- the more people you get to play, the more fun the game becomes."

While revenue from sales of virtual items is still estimated to be a small part of the more than $40 billion global games market, it is growing quickly and could broaden the audience for games by eliminating the hefty price tags that users must pay for typical game-playing consoles and PC game software sold in retail stores. Vivendi SA's World of Warcraft, one of the most successful online games, costs most users about $15 a month to play, though few other games have managed to approach its global audience of about 10 million subscribers.

"We sell social experiences, not packaged products," Min Kim, vice president of marketing at Nexon's U.S. division.

Some big Western games publishers are starting to mimic Nexon and other Asian game companies that sell virtual goods, in a potential threat to their businesses. EA of Redwood City, Calif., has started giving away its FIFA soccer game in Korea, in part because piracy there hurt retail sales of the product. Instead it charges players for new uniforms and other character enhancements. Later this year, EA will release a free, cartoonish combat game, Battlefield Heroes, that lets users buy weapons and other gear.

A big test for Nexon will come with this year's release of its first game aimed at the North American market, Sugar Rush, in which players brawl with each other as they try to gobble up virtual coins. The game is being made by a team of Nexon workers in Vancouver, Canada, including Steve Rechtschaffner, a former competitive freestyle skier who helped to create EA's popular SSX skiing game during a 12-year career at the games publisher.

Mr. Rechtschaffner, now chief creative officer at Nexon Publishing of North America, predicts more and more consumer dollars will shift toward free online games and away from traditional games costing $60 each. "I think we're going to become television to their film," he says. "There will always be room for big blockbusters, but there will be less and less of them. I think we'll reach a much, much broader audience."

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From: Lynn5/26/2008 2:43:18 PM
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Korea Kimchi Discovery #23
Oil Shock: Downside Risks to Margin Expectations (C)

? KOSPI risks on margins and costs – We see the biggest threats to Korean stock
valuations in potential disappointment on margins due to high expectations
(currently consensus expects rising OPM until 3Q) and surging oil prices (WTI:
$133.2/bbl as of May 21 vs. consensus estimate of $97/bbl for 2008).

? Macro impact of rapidly rising oil prices – Sharp increases in oil prices will
likely trigger further inflation, a deepening current account deficit (8% of GDP
if oil price rises to $200/bbl), and squeezed profit margins, especially for SMEs.
Interest rates would likely rise, which would negatively impact Korean banks.

? Who can pass on margin pressures? Steel, construction, industrial, shipbuilders,
insurers, and complex refiners are more defensive in a rising oil price
environment due to either pricing power, cost restructuring or mix

? Which sectors are most vulnerable? Utilities, chemical, tourism, telecoms,
banks, consumer, auto, and tech sectors are relatively more vulnerable to
rising oil prices and an inflationary environment.

? Investment strategy in a rising oil price environment – Defensive: POSCO,
Samsung Eng, GS E&C, Doosan Heavy, Hyundai Heavy, Hyundai Marine & Fire,
and S-Oil. Vulnerable: KEPCO, Honam Petro, Hana Tour, Hotel Shilla, KTF,
Kookmin Bank, Shinsegae, Hite, Orion, Cheil Ind, SDI, TEW, and Kia Motor.

[end of copy/paste]

This is a 56 page research report that has a LOT of charts, graphs, and discussion. If anyone here knows someone with access to C research, ask them to get hold of it for you.

A quote for HYHZF at C for this as the most recent research report.


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From: Paul Kern6/18/2008 11:58:04 PM
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MSCI May Add Israel, Korea as Developed Countries (Update1)

By Fabio Alves and Tal Barak

June 19 (Bloomberg) -- MSCI Inc. will decide within 12 months whether to reclassify South Korea and Israel as developed countries, elevating them from its emerging market indexes.

MSCI, whose equity gauges are used by managers overseeing a combined $3 trillion, will also consider dropping Argentina and Colombia from the emerging market classification. United Arab Emirates, Kuwait and Qatar may be raised to emerging markets from their frontier market status after a consultation process.

The decisions will be based on each country's economic development and the ``accessibility of its market, including the efficiency of its operational framework, as well as on the role of geopolitical risk,'' MSCI said in a press release.

South Korea is the third-largest developing nation in MSCI's stock benchmarks, representing 13.1 percent of the MSCI Emerging Market Index, according to data compiled by Bloomberg. Israeli stocks account for 2.43 percent of the MSCI Emerging Markets Index, according to Bloomberg data.

South Korean equities have a capitalization of 745 trillion won ($727 billion) on a so-called free-float adjusted basis, which includes only companies that overseas investors can readily buy and sell. The Kospi index, the nation's stock benchmark, has fallen 6.5 percent this year.

An MSCI upgrade to developed status for South Korea may not have lasting benefits for the nation's stocks because interest among developed-market investors would be confined to only the largest companies by value, Citigroup Inc. said in April.

`Small Fish'

``It is possibly better to be a big fish in a small pond rather than a small fish in a big pond,'' Paul Chanin, a Singapore-based analyst at Citigroup, wrote in a note to clients on April 21. FTSE Group, MSCI's smaller rival, said in September that it will likely promote South Korea to ``developed'' in 2008.

An upgrade by MSCI would probably attract net buying of up to $7.7 billion in South Korea by funds that track the indexes, Chanin wrote at the time.

MSCI said today that institutional investors ``remain concerned with the lack of full convertibility of the Korea won, including the lack of an efficient offshore market for the currency.''

Israel, which won developed status from FTSE Group in September, is headed for the first annual stock market decline since 2002. The benchmark TA-25 Index has lost 7.3 percent this year.

Final Ruling

A final decision on Israel and South Korea will be made no later than June 2009, MSCI said.

Argentina and Colombia may be dropped from their emerging markets status ``unless significant improvements in the relevant capital flow restrictions are observed,'' MSCI said.

So-called frontier markets typically have less developed economies and financial markets than emerging markets, and have more restrictions on foreign stock ownership.

Argentina's Merval index lost 7.6 percent over the past year, while Colombia's IGBC has dropped 10 percent.

Jordan, an emerging market, will be dropped to the frontier category at the end of November, MSCI said.

To contact the reporters on this story: Fabio Alves in New York at; Tal Barak in Tel Aviv at
Last Updated: June 18, 2008 19:19 EDT

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From: Paul Kern8/6/2008 11:56:55 PM
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Bank of Korea Raises Rate to 5.25% to Curb Inflation (Update3)

By William Sim

Aug. 7 (Bloomberg) -- The Bank of Korea unexpectedly raised its benchmark interest rate to an eight-year high of 5.25 percent, saying the fastest inflation in a decade poses a greater threat than slowing economic growth.

Central bank Governor Lee Seong Tae boosted the seven-day repurchase rate by a quarter point in Seoul today, the first increase in 12 months. Just 6 of the 19 economists surveyed by Bloomberg forecast the move, with the rest seeing no change.

Stocks extended losses on concern the highest borrowing costs since early 2001 will cool an economy growing at the weakest pace in a year. Lee, who joins policy makers from India to Indonesia in raising rates as soaring fuel and food costs fan inflation, may now stand pat to avoid further damping consumer spending and company profits.

``Today's decision was a prudent, necessary step to ensure that inflationary expectations remain under control,'' said Robert Subbaraman, chief Asia economist at Lehman Brothers Holdings Inc. in Hong Kong. ``It will be a one-shot increase: policy focus will start to move away from inflation towards growth concerns later this year.''

Consumer prices climbed 5.9 percent in July from a year earlier, overshooting the central bank's target for the ninth straight month. The bank aims to keep inflation between 2.5 percent and 3.5 percent, on average, for the three years to 2009.

``Inflation will likely remain quite high in the coming months,'' Governor Lee told reporters today. He said inflation probably will exceed the bank's forecast of 5.2 percent in the second half of the year.

Government Concern

The government said earlier today the economy is weakening as consumer spending slows. ``We need to place priority in stabilizing ordinary people's lives and creating more jobs,'' the finance ministry said in its monthly report.

The Kospi index of stocks dropped 1.4 percent to 1,556.19 at 12:20 p.m. in Seoul. The won rose 0.1 percent to 1,015.25 against the dollar. The yield on the five-year government bond increased 3 basis points to 5.74 percent.

``Today's decision is likely to do more harm than good,'' said Frederic Neumann, an economist at HSBC Holdings Plc in Hong Kong. ``Economic growth already looks set to decelerate sharply over the second half of the year.''

Ssangyong Motor Co., the South Korean unit of China's biggest automaker, reported that domestic sales slumped 67 percent in June from a year earlier. Local sales at Hyundai Motor Co., Korea's largest carmaker, slipped 0.6 percent in the second quarter.

Mounting Pessimism

Households were at their most pessimistic in almost four years in June and manufacturers' confidence for August sank to the lowest in three years. Factory output increased 6.7 percent in June from a year earlier, the smallest gain in nine months.

Adding to the central bank's concerns, the won's 8 percent decline against the dollar this year has made imported goods more expensive and exacerbated inflation pressures. Import prices surged 49 percent in June from a year ago, the biggest gain in more than 10 years.

``The rate hike should partly help support the currency,'' Lehman's Subbaraman said. ``The weakening won has been adding more import-price pressure and today's rate increase should help ease that.''

The central bank is estimated to have spent more than $12 billion since the end of May to boost the value of the won and cool inflation, said Jung Chan Ho, a currency dealer at Shinhan Bank in Seoul.

``The pace of intervention in itself was clearly unsustainable over the long term, given the BOK's limited reserve pool,'' HSBC's Neumman said. ``The hike in the base rate should therefore be interpreted as a complement to the authorities' policy of supporting the exchange rate.''

The Bank of Korea also boosted the interest rate on the funds it makes available for loans to small businesses by a quarter-point to 3.25 percent.

To contact the reporter on this story: William Sim in Seoul at
Last Updated: August 6, 2008 23:24 EDT

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From: Paul Kern8/17/2008 6:22:47 PM
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South Korea's Department Store Sales Rise By Least in 5 Months

By Seyoon Kim

Aug. 18 (Bloomberg) -- South Korea's department store sales increased at the slowest pace in five months in July, adding to evidence consumers are curtailing their spending and slowing the economy's expansion.

Sales at the nation's three biggest chains rose 5.9 percent from a year earlier, easing from June's 11.2 percent gain, the Ministry of Knowledge Economy said in Gwacheon today.

Moderating spending will further cool an economy that grew at the weakest annual pace in more than a year last quarter. Households, struggling with surging living costs, have reined in purchases of non-essential goods, which may erode earnings at retailers such as Lotte Shopping Co., the nation's largest department store operator.

The Kospi stock index has dropped 17 percent this year amid signs of cooling economic growth. Shares in Lotte Shopping have fallen 29 percent this year, and those in Hyundai Department Store Co., the second biggest, have slumped 26 percent.

Consumer confidence fell to the lowest level in eight years in July. The economy expanded 4.8 percent last quarter from a year earlier, the slowest pace since the start of 2007.

Spiraling food and fuel prices have eroded household budgets. Consumer prices climbed 5.9 percent in July, the biggest gain since 1998.

The Bank of Korea lifted its benchmark interest rate to an eight-year high of 5.25 percent this month, the first increase in a year, to quell inflation.

Spending on men's clothes fell 6.6 percent in July from last year, today's report showed. In contrast, sales of luxury goods at department stores gained 30.7 percent.

Sales at discount stores rose 2.1 percent last month from a year earlier, reversing a 1.9 percent drop in June.

To contact the reporter on this story: Seyoon Kim in Seoul at
Last Updated: August 17, 2008 17:00 EDT

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From: Julius Wong9/17/2008 6:48:00 AM
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South Korea Turns Tables on Wall Street After Bailout (Update2)
By Bomi Lim

Sept. 16 (Bloomberg) -- In 1999, Kim Jung Yul sat at a table negotiating the sale of Korea First Bank to San Francisco-based Newbridge Capital LLC as it sought cash to stay afloat during the Asian financial crisis. Nine years later, he's scouting for a Korean buyer for a U.S. bank.

``I was determined to squeeze one more dollar out of them,'' said Kim, recalling four months of talks in Seoul as the state- run company he worked for sold its controlling stake. ``Now, it's U.S. institutions that desperately need capital.''

Kim's new role, working as a consultant for a bank he declines to identify, underscores the resurgence of the financial industry in a nation that a decade ago was bailed out by the International Monetary Fund. As banking writedowns from the implosion of the U.S. mortgage market swelled past $510 billion, Merrill Lynch & Co. has received cash from South Korean investors and Lehman Brothers Holdings Inc. held unsuccessful talks about selling a stake to state-owned Korea Development Bank.

Korean investors are seeking to use cash and expertise amassed as they emerged from the country's debt crisis to hunt for bargains among U.S. banks. Even so, they're encountering resistance from Wall Street firms unwilling, like Kim in 1999, to sell out too cheaply.

KDB's talks with New York-based Lehman stalled last week because of disagreements over price, as did Korea Asset Management Corp.'s bid to buy bad loans from Merrill.

Lehman yesterday filed for Chapter 11 bankruptcy protection after failing to find a buyer. Bank of America Corp., the biggest U.S. consumer bank, agreed to acquire Merrill Lynch & Co., the third-biggest U.S. securities firm by market value, for about $50 billion in stock.

`Buyer's Market'

``The tables have turned, and U.S. banks have to realize that,'' said Lee Chol Hwi, chief executive officer of state-run Korea Asset Management Corp., known as Kamco, who was trying to buy $200 million of nonperforming loans from Merrill. ``It's practically a buyer's market there.''

Kamco, which helped liquidate distressed assets in South Korea after the 1997 to 1998 financial crisis, is seeking to buy as much as 1 trillion won ($904 million) of bad loans in the U.S. CEO Lee says there are plenty of U.S. companies seeking Korean money. Fund managers, companies and even state governors in the U.S. have requested a few minutes of his time during a trip he's planning there later this month, Lee said.

``That was unthinkable in the past,'' he said.

Banking Overhaul

South Korea's economy shrank 6.9 percent in 1998, during the worst recession since the Korean War ended in 1953, prompting citizens to turn over $2.2 billion of gold to the treasury as the crisis pushed the country to the brink of a sovereign default.

During the banking overhaul that followed, the government allowed more than 630 financial companies to fail and sold two of the biggest lenders to overseas investors. Korea also began building its foreign exchange holdings to prevent another crisis. Its foreign currency reserves swelled from $8.9 billion at the end of 1997 to $243.2 billion on Aug. 31, the sixth-largest in the world, as exports of ships, cars and electronic goods rose.

``Korea's financial industry has made remarkable progress over the past 10 years,'' said Chung Duck Koo, who led the South Korean delegation to talks with the IMF in late 1997, resulting in a $57 billion bailout. Today's credit market turmoil ``sets the stage for Korean financial firms to go global.''

Expansion Plans

Min Euoo Sung, the former Lehman executive who took the helm at Korea Development Bank in June, said last week that he plans to make it Asia's third-largest bank within five years. The government plans to sell its 100 percent share in the lender by 2012, with an initial public offering planned next year.

KDB's talks with Lehman started in July and collapsed on Sept. 10, Min told reporters today. The Korean bank sought to buy a controlling interest for a third the price Lehman was offering, with the investment to be made in late February, 2009, he said.

``I am certain Lehman wouldn't have been pushed to bankruptcy had the deal gone through,'' Min said. ``It would have been a win-win situation.''

South Korean firms have invested about $720 million in securities linked to Lehman, the country's financial regulator said in a statement released yesterday.

South Korea flexed its financial muscles in January when Korea Investment Corp., the $30 billion sovereign wealth fund known as KIC, invested $2 billion in New York-based Merrill. Hana Bank, Korea's fourth-biggest, bought a $50 million stake in Merrill in February.

Merrill plunged more than 60 percent in the year to Sept. 12 in New York Stock Exchange composite trading. Bank of America will pay $29 a share in stock, 70 percent more than the Sept. 12 closing price, for Merrill.

Regional Challenge

Chin Young Wook, KIC's chief executive officer, said July 29 the fund will approach future U.S. deals ``carefully.''

KIC's investment in Wall Street is smaller than Singapore's Temasek Holdings Pte, which invested more than $5 billion in Merrill, and China Investment Corp., which put $8 billion into Morgan Stanley and Blackstone Group LP during the past year. Morgan Stanley is the second-largest U.S. securities firm and Blackstone manages the biggest leveraged buyout fund. Both are based in New York.

``Korea faces challenges from other players in the region like Temasek who have much more expertise in making such cross- border investments,'' says Kim Ja Bonn, a researcher at the Korea Institute of Finance in Seoul. ``It's important to seize a chance when it comes, while accurately assessing the deal.''

Stuttering Economy

Jun Kwang Woo, chairman of the Financial Services Commission, has cautioned Korean firms about the risks of buying U.S. banks twice in the past month.

The regulator's warning comes as Korea's economy stutters. Inflation is at a 10-year high and the won has slumped 19 percent this year against the dollar, making it the worst-performing Asian currency.

That hasn't damped enthusiasm among South Korean investors, said Kim, 51, who started DW Consulting in 2004 and advised Seoul-based LIG Insurance Co. on the sale of its life insurance affiliate to Seoul-based Woori Finance Holdings Co. and London- based Aviva Plc, the U.K.'s biggest insurer, earlier this year.

``This is the chance of a lifetime for Korean companies to enter the U.S. market,'' said Kim, who was an official at state- run Korea Deposit Insurance Corp. when it sold a controlling stake in Korea First Bank to Newbridge. The buyout firm made a $1 billion profit selling its interest to London-based Standard Chartered Plc in 2005.

``We were naive back then,'' Kim said. ``We paid a high price to learn from the crisis, and it's time to put what we've learned to use.''

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From: Paul Kern10/6/2008 11:46:24 PM
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Korean Won Falls to 7-Year Low; Government Says to Use Reserves

By Kim Kyoungwha and Seyoon Kim

Oct. 7 (Bloomberg) -- South Korea's won slumped, touching the lowest level since 2001, even as the government said it will use its foreign-exchange reserves to provide funds to the local financial system.

The currency, Asia's worst performer this year, tumbled as much as 7 percent, the most since December 1997 when the nation sought an emergency loan from the International Monetary Fund to meet debt payments. The government will use its currency reserves, the world's sixth-largest, to provide funds when needed, Deputy Finance Minister Shin Je Yoon said today.

``The government should try to ease the won's drastic drop, to calm investors, with its ample reserves,'' said Lee Sang Jae, an economist at Hyundai Securities Co. in Seoul. ``South Korea is much sounder in terms of economic fundamentals than it was during the 1997-1998 financial crisis.''

The won, the worst performing major currency, is now down 30 percent this year. Investors are concerned the deepening global credit crunch is creating a funding shortage for the nation's banks, exporters and manufacturers, eroding confidence and threatening the economic outlook.

South Korea has been building up its foreign currency reserves since Asia's financial crisis struck the region a decade ago. Those reserves fell for a fifth month in August to $243.2 billion, according to the central bank, as policy makers intervened to stem the won's slide.

Investors shouldn't overreact as the government can cope with the global financial turmoil, said Rhee Chang Yong, vice chairman of South Korea's financial regulator. The government is preparing ``various'' measures in response, he said at a meeting today in Seoul.

`Clearly Different'

``The deteriorating overseas borrowing situation is mainly due to the global credit crunch,'' Rhee said. ``The situation is clearly different from the financial crisis'' in 1997.

The won tumbled 5.5 percent to 1,338.75 per dollar as of 12:06 p.m. local time, according to Seoul Money Brokerage Services Ltd. The currency touched a low of 1,364.05 today, the weakest since April 2001.

Korea's Kospi stock index fell 1 percent today, and is down 29 percent this year, headed for its first annual loss since 2002. Investors overseas sold more of the country's shares then they purchased on all but 15 days since May as the financial turmoil prompted investors to exit emerging-market assets. Eight of the 10 most-traded Asian currencies weakened this year.

``Sentiment is extremely unstable as the crisis seems to be spreading fast,'' said Jay Won, a currency dealer at Korea Exchange Bank in Seoul. ``People are panicking and they only want to hold dollars.''

Stabilize Currency

The government's priority is to stabilize the currency, Finance Minister Kang Man Soo said yesterday. Traders said the central bank yesterday intervened in the market after the currency slumped as much as 5.6 percent.

Kang yesterday urged banks to sell overseas assets to raise cash they can use to lend to local companies struggling with rising offshore borrowing costs. Lack of access to funds makes it harder for companies to pay wages and buy raw materials.

``This is not typically a fundamental problem,'' said Mirza Baig, a currency strategist in Singapore at Deutsche Bank AG, the world's top currency trader. ``But when you are in the middle of a crisis, it does become a fundamental problem because nobody is prepared to refinance your maturing loans.''

Bonds Fall

Korea's government bonds fell on speculation policy makers will ease their monetary stance after a local newspaper reported the central bank may cut the reserve requirements for banks to help increase liquidity in the market.

The central bank may reduce the reserve ratio requirement and increase lending via repurchase agreements, the Korean- language Seoul Economic Daily reported, citing a government official it didn't identify.

Bank of Korea Governor Lee Seong Tae and fellow policy makers meet Oct. 9 to review interest rates. The bank kept its benchmark rate at an eight-year high of 5.25 percent last month.

The yield on the 5.5 percent note due June 2011 fell 4 basis points to 5.72 percent, according to Korea Exchange. The price rose 0.11, or 118 won per 10,000 won face amount, to 101.25. A basis point is 0.01 percentage point.

To contact the reporters on this story: Kim Kyoungwha in Beijing at; Seyoon Kim in Seoul at
Last Updated: October 6, 2008 23:09 EDT

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From: Paul Kern10/26/2008 3:50:56 PM
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Bank of Korea Calls Emergency Meeting, May Lower Interest Rates

By Seyoon Kim

Oct. 27 (Bloomberg) -- The Bank of Korea monetary policy board called an unscheduled meeting for today, possibly to discuss an interest rate cut after the stock market lost a fifth if its value last week.

``There will be an interim monetary policy board meeting'' today at 8 a.m., the Seoul-based central bank said via a text message sent to the media yesterday, without providing further information.

President Lee Myung Bak yesterday convened a meeting of the nation's top economic policy makers, including Finance Minister Kang Man Soo and central bank Governor Lee Seong Tae, to discuss measures against the financial-market turmoil. The benchmark Kospi stock index plummeted 20 percent last week and the won closed near the lowest level against the dollar in a decade on Oct. 24, extending this year's loss to 35 percent.

``I'm almost certain they'll cut and it's highly likely to be 50 basis points,'' said Lim Jiwon, economist at JPMorgan Chase & Co. in Seoul. ``A rate cut may help boost the stock market a bit, but all in all, the authorities need to restore investor confidence and for this, a concerted effort and more preemptive steps are needed.''

The President urged his aides to come up with appropriate measures ``so that the financial turmoil doesn't link to a recession in the real economy,'' a statement on the Web site of the presidential house said yesterday.

Beijing Summit

Lee returned from a weekend Beijing meeting of Asian and European leaders at which they called for an overhaul of World War II-era banking rules. It was the first meeting of Asian and European Union chiefs since calls for coordinated action mounted amid bank failures and plunging stock prices that began last month.

South Korea's government will probably come up with steps soon to encourage companies to expand investment in factories and create jobs, Yonhap News reported yesterday. The news agency also said the central bank's policy board may discuss cutting interest rates as much as a half-percentage point.

The bank cut rates for the first time in four years on Oct. 9, by 25 basis points, to 5 percent.

Federal Reserve policy makers, meeting this week, are forecast to lower interest rates for a second time this month.

South Korea's economy expanded at the slowest pace in four years last quarter, sparking concern the nation is headed for its first recession since requiring an International Monetary Fund bailout 10 years ago.

Global Crisis

``The global crisis has been brought home to Korea with a rapid deceleration in growth, and there's worse to come,'' Daniel Melser, a senior economist at Moody's in Sydney said after the release of the gross domestic product figures on Oct. 24. ``The state of the economy demands a rapid easing in monetary policy from the Bank of Korea.''

South Korea's central bank said Oct. 24 it will inject 2 trillion won ($1.4 billion) into the financial system through repurchase-agreement operations.

The government last week pledged $130 billion to support lenders as the credit crunch saps local banks' access to foreign funds, and said they will spend as much as 8 trillion won to rescue builders struggling with unsold apartments.

To contact the reporter on this story: Seyoon Kim in Seoul at
Last Updated: October 26, 2008 11:00 EDT

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To: Paul Kern who wrote (194)10/26/2008 9:47:14 PM
From: Paul Kern
   of 214
Bank of Korea Cuts Key Rate a Record 75 Basis Points (Update1)

By William Sim and Seyoon Kim

Oct. 27 (Bloomberg) -- The Bank of Korea slashed interest rates by the most ever in an attempt to restore confidence after stocks lost a fifth of their value and the won fell to a decade low last week. Stocks rose.

Governor Lee Seong Tae lowered the seven-day repurchase rate by 75 basis points to 4.25 percent, the central bank said in a statement in Seoul today. The cut follows the first reduction in four years on Oct. 9. The meeting was still taking place at 9:55 a.m. in Seoul and a briefing will follow.

President Lee Myung Bak yesterday convened an emergency meeting of the nation's top economic policy makers, including Finance Minister Kang Man Soo and central bank Governor Lee, to discuss measures to combat financial market turmoil. The bank said today it would ease rules on foreign-currency lending to help local exporters.

``There isn't much President Lee's administration can do to shield the economy from external shocks, but their efforts will help the markets and the economy,'' said Oh Suktae, economist at Citibank Korea Inc. in Seoul.

Japan's government will compile a package of measures after stocks slumped last week, Finance Minister Shoichi Nakagawa said last night. The Nikkei 225 Stock Average fell today to the lowest since 1982 before rebounding.

Stocks Slump

``Emergency meetings by policy makers around the world reflect their fear and the severity of financial turmoil,'' said Masamichi Adachi, senior economist at JPMorgan Chase & Co. in Tokyo. ``They are on the right track and this excessive volatility in markets should calm soon.''

South Korea's Kospi stock index rose 1.3 percent at 9:65 a.m. in Seoul. The index plummeted 20 percent last week. The won traded at 1,421.45 against the dollar from 1424 late Oct. 24. The won closed near the lowest level against the dollar in a decade on Oct. 24, extending this year's loss to 35 percent.

Under the new currency lending rules announced today, South Korea will allow exporters to borrow dollars to pay for the currency-related losses. Also small businesses, which borrowed mostly in Japanese yen, can extend their foreign-currency loans for another year. The won has plummeted 45 percent against the yen this year.

``The Bank of Korea seems determined to stop the market panic from the U.S. financial crisis spreading,'' said Chun Chong Woo, an economist at SC First Bank Korea Ltd. in Seoul.

President Lee returned this weekend from a Beijing meeting of Asian and European leaders at which they called for an overhaul of World War II-era banking rules. It was the first meeting of Asian and European Union chiefs since calls for coordinated action mounted amid bank failures and plunging stock prices that began in September.

Federal Reserve

Federal Reserve policy makers, meeting this week, are forecast to lower interest rates for a second time this month to try to thaw frozen credit markets and prevent a deepening recession.

South Korea last week pledged $130 billion to support lenders as the credit crunch saps local banks' access to foreign funds, and said they will spend as much as 8 trillion won to rescue builders struggling with unsold homes. The central bank said Oct. 24 it will inject 2 trillion won ($1.4 billion) into the financial system through repurchase-agreement operations.

Economy Cools

A report last week showed the $970 billion economy expanded 3.9 percent in the third quarter from last year, the slowest pace since 2005, and down from 4.8 percent growth in the second quarter.

``We have turned more cautious on the economic outlook on the ongoing turbulence in the global financial markets,'' said Kwon Goohoon, economist at Goldman Sachs Group Inc. in Seoul in a note.

To contact the reporter on this story: Seyoon Kim in Seoul at
Last Updated: October 26, 2008 20:57 EDT

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From: Julius Wong10/30/2008 6:55:01 AM
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South Korea Stocks Surge by Record on Fed Dollar Swap (Update3)
By William Sim and Saeromi Shin

Oct. 30 (Bloomberg) -- South Korea's stock index rose by a record and the won surged after the central bank signed a $30 billion currency swap with the Federal Reserve and President Lee Myung Bak said he's ready to take more steps to aid the economy.

The swap line is part of the Federal Reserve's efforts to alleviate a credit freeze in emerging nations, with the U.S. also providing dollars to Singapore, Brazil and Mexico. Korean lawmakers today approved the government's $100 billion guarantee of bank debts to help lenders struggling to access foreign funds.

Korea's currency jumped 14 percent, the most in a decade, as policy makers' actions allayed concern the nation was headed for a repeat of 1997, when it needed an International Monetary Fund bailout to help repay offshore debt. The Fed's dollar provisions are part of increased global endeavors to thaw money markets, with Hong Kong and Taiwan lowering interest rates today following cuts yesterday by the U.S. and China.

``This is the strongest measure so far,'' said Chang In Whan, chief executive officer of KTB Asset Management Co. in Seoul, which manages the equivalent of $4.3 billion in equities.

The Fed deal ``will create a buffer for Korea's foreign- currency supply and improve foreigners' confidence in the country,'' Chang said. ``It shows the Fed won't just sit back and watch overseas markets go down.''

Default protection costs on South Korean government debt fell by the most in more than four years. Five-year credit- default contracts on the country's external debt fell 130 basis points to 435, according to a Bloomberg survey of three dealers.

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