Thanks for starting the thread. Still trying to figure out the cause of the big drop in Kospi, and to an even greater extent, KF and KEF last month. To what extent was the reopening of the rift with Japan a contributor? Here's a recent update:
S. Korean Trade Minister Cancels Trip to Japan Talks (Update2)
April 7 (Bloomberg) -- South Korean Minister of Trade Kim Hyun-Chong canceled plans to attend a meeting of Asian trade officials in Japan as a spat over Japanese textbooks, that have also drawn criticism from China, sours relations between the two countries.
``He was scheduled to come,' said Akira Chiba, a spokesman at Japan's Ministry of Foreign Affairs. The South Korean trade official said he had ``a conflict in his schedule.'
South Korea and China this week protested to Japan over the approval of text books they say paint over Japanese atrocities during its occupation of their countries before and during World War II. South Korea and Japan are also arguing over two islands between the two countries.
The meeting in Chiba prefecture, near Tokyo, to discuss non-agricultural market access will include delegations from the Philippines, Singapore, Thailand and Hong Kong. Malaysia has also declined to attend, with representatives from China and Indonesia yet to confirm their plans, according to the Ministry of Economy Trade and Industry.
Japan's Ministry of Science and Education on Tuesday approved junior high school textbooks that remove references to so-called comfort women in China and Korea who were forced to provide sex to Japanese soldiers during World War II.
Reacting `Emotionally'
One book says South Korea is illegally occupying the two disputed islands. South Korea calls the islands Dokdo and Japan calls them Takeshima.
South Korea is ``reacting emotionally,' Japanese government spokesman Seiken Sugiura said yesterday at a regular briefing in Tokyo, after the protest from its neighbor.
The Japanese coast guard on April 5 caught two South Korean fishing boats and arrested their captains for entering the country's waters and illegally fishing there, the Daily Yomiuri reported today, without citing anyone.
The tensions comes in a year designated as Korea-Japan ``friendship year' by Japanese Prime Minister Junichiro Koizumi and South Korean President Roh Moo Hyun.
Last year they agreed to complete a free trade agreement this year to boost the $68 billion of cross-border trade. Japan is South Korea's third-largest trading partner after China and the U.S.
The two leaders, who have agreed to regular summit meetings, last met in coastal resort of Ibusuki on the southern Japanese island of Kyushu on Dec. 19.
Koizumi may visit Seoul as early as June to meet Roh, Kyodo News reported today, citing Japanese Foreign Minister, Nobutaka Machimura.
bloomberg.com
___
This comes at a time of increased optimism about the Korean economy, so the drop is somewhat puzzling to me. Does the drop simply reflect perceived vulnerability of Korea's export lead growth strategy to higher oil prices?
Another Bloomberg article:
South Korean Consumers Turn Optimistic in March (Update3)
April 7 (Bloomberg) -- South Korea's consumers were optimistic for the first time in more than two years in March, a survey showed, adding to evidence that a recovery in household spending will sustain growth in Asia's third-biggest economy.
An index measuring consumer confidence rose to 102.2 in March from 99.4 in February and 90.3 in January, the National Statistical Office said on its Web site today. That's the first reading above 100, indicating optimists outnumber pessimists, since Sept. 2002.
The government is cutting taxes and urging banks to forgive consumers' bad loans to spur domestic demand, as higher oil prices and the won's 13 percent gain against the dollar in the past year hurt exports. The central bank kept its benchmark interest rate unchanged at a record low for a fifth straight month at a policy meeting today.
``We are optimistic about Korea's economy,'' Richard Wacker, chief executive of Korea Exchange Bank, controlled by Texas-based Lone Star Funds, told a briefing in Seoul. He said his bank supports government programs to cancel debt of low-income defaulters.
The benchmark Kospi index gained 0.1 percent to 988.90 at the close in Seoul. The yield on the benchmark three-year government bonds fell 5 basis points to 3.88 percent as of 3:00 p.m., according to Korea BondWeb, a Web site. A basis point is 0.01 percentage point.
High Oil Costs
The Bank of Korea ``will manage monetary policy to continue supporting the economy's recovery,'' Governor Park Seung told reporters at a briefing today. He reiterated the bank's 4 percent economic growth forecast for this year, saying higher-than- expected oil costs are deterring the bank from raising its estimate. The economy grew 4.6 percent in 2004.
The cost of crude oil in New York reached a record $58.28 a barrel on April 4 and closed yesterday at $55.80, 28 percent higher than at the start of the year.
Rising energy bills mean companies and consumers worldwide have less to spend on Hyundai Motor Co. cars, Samsung Electronics Co. cell phones and other Korean goods. The commerce ministry predicts export growth will slow to 12 percent this year from 31 percent in 2004.
Reports for March have so far beaten economists' expectations. Exports rose 14 percent from a year earlier to a record $24.2 billion, compared with the 12 percent median forecast in a Bloomberg News survey of eight economists.
Sales Rebound
Hyundai Motor Co., the nation's largest automaker, predicts its domestic sales will rise 9.8 percent this year to 605,000 units, after sliding 16 percent in 2004. Lotte Department Store Co., one of South Korea's top three department store chains, said sales rose 6.3 percent from a year earlier in March after 6.1 percent growth in the first two months.
``Around this time last year, we were seeing minus growth, so it's great compared to then,'' said Lim Hyoung Woo, a spokesman for Lotte.
South Koreans cut back on spending in the past two years to help pay off their credit-card debts. One in 13 of the nation's 48 million people were three months or more behind on debt payments at the end of last year, official figures show.
To help revive spending, the government cut taxes and the central bank lowered borrowing costs. The Bank of Korea kept its benchmark overnight call rate at 3.25 percent at a monthly policy meeting today, a decision forecast by all seven economists and bond analysts in a Bloomberg News survey.
Inflation
``The Bank of Korea is likely to hold rates unchanged at least for the first half, and possibly most of the second half, to facilitate growth,'' said Tai Hui, an economist at Standard Chartered Bank Plc in Hong Kong. ``Inflation is a big concern for the bank, but so far we are not seeing significant pressure on that front.''
Producer prices in March rose 2.7 percent from a year earlier, the smallest gain in more than a year, the central bank reported yesterday. Consumer prices rose 3.1 percent after climbing 3.3 percent in February, the government said April 1.
South Korea's economy expanded a seasonally adjusted 0.9 percent in the fourth quarter from the third, the fastest pace in a year. Governor Park said the government's 5 percent growth target may be achieved in 2006.
``This is the third month that consumer confidence has increased,'' said Lee Sung Kwon, an economist at Good Morning Shinhan Securities Co. in Seoul. ``It's sustainable now.''
bloomberg.com |
