Sonny, I consider it quite likely that S.Korea will default on its leading bank and soverign debt obligations. It will be called a debt moratorium in anticipation of a restructuring, or something.
With $100bil needing rolling over in Jan 1998 (due mostly to Japanese, Hong Kong and the London Eurodollar markets), it is very much unclear whether S.Korea would make it even if they did everything from here out that IMF prescribes. They hid and lied about the depth of their difficulties for a long time, even to themselves, and came to the IMF way too late.
What seems to be rather not well understood in most quarters is that the IMF cannot extend further credits to S.Korea without getting major additional funding from the biggies, such as Japan, US, Germany, UK. The Japanese seem rather reluctant to do much, despite fact that Korea is a major export market for them (they are also a major competitor in steel, ships, chips, cars (to 3rd world mkts), etc. US congress not much inclined to up. Etc. Treasury is about tapped out in its special drawing fund that it used the lead the funding of Mexico's bailout. After the existing commitment to Korea there is about $20 bil left there, which many think needs to be kept in reserve for other countries, etc. Anyway, not that much left. Without Congress.
I actually think the fact that Kim Dae Yong, the labor/socialist won may end up being a positive, although not at first. He're why.
Has little to do with him. The markets will dicated what Korea has to do. I think having their man in office may encourage labor, etc., to be more reasonable than they otherwise would be in Korea. Resist as he may at first, the prospect of not enough int'l credit to fund evien their best exports will be sobering, mighty sobering.
Much, but not all, of this is priced in the mkt. I think the shock of Korean disaster is mostly in. The extent of the fallout will be increasingly deeply discovered for a few months.
(Intc has not reached its lows.)
Doug |
