sounds mildy bullish--question is when to jump in and what fund/stock?
New South Korea Begins Taking Shape
By Bill Tarrant
SEOUL, South Korea (Reuters) - A fundamental reshaping of South Korea's financial picture was in motion Friday following new commitments by the government to open up the country's markets in exchange for fresh aid to stave off a debt catastrophe.
President-elect Kim Dae-jung on Friday met leaders of the Federation of Korean Trade Unions and told them layoffs would be an inevitable by-product of industrial restructuring.
Kim, whose high-profile schedule has made outgoing President Kim Young-sam all but invisible, also met IMF mission chief Herbert Neiss to talk about Seoul's latest commitments to reform.
South Korea agreed on Christmas Eve to sweeping new reforms -- including lifting almost all barriers to foreign investment in its financial markets -- in exchange for swifter disbursement of $10 billion of the record-breaking $60 billion IMF-led bailout package agreed to earlier this month.
"What is most important now is to restore international confidence," Kim told trade union leader Park In-sang, adding that labor must roll out the red carpet to foreign capital.
Kim and Park agreed to organize a forum involving government, labor and management groups to work out a new industrial relations policy under the IMF agreements, a spokesman for Kim said.
For a Korean president and labor leader even to mention the possibility of layoffs is one sign of the new era under the International Monetary Fund regime.
For the first time in memory, major Korean firms face the prospect of liquidation after a Seoul court said on Friday it had rejected receivership applications filed by two listed firms, Coryo Securities and Dongsuh Securities.
The court said the rejection was based upon its judgement that there was little chance the two firms could survive and said the Finance Ministry and the Securities and Exchange Commission had similar views about the two brokerages.
Receivership puts a company's affairs into court hands while its debts are rescheduled. Analysts say no major corporation or financial institution has been allowed to die for years.
Survival of hopelessly insolvent companies and guaranteed jobs for labor have been a part of the foundation of Korea Inc. -- a collaboration between bureaucrats, business groups and bankers to grow the economy at all costs.
But the old edifice is being dismantled under the supervision of the IMF.
In its latest commitments to the IMF, Seoul said it would announce next month how employers and workers would share the burden "in case of labor redundancies" and announce unemployment compensation and job retraining programs.
It said it would implement "a comprehensive restructuring plan for the financial sector that will include the merger and closure of insolvent institutions."
The government said it would draft new legislation that would streamline bankruptcy procedures and allow sick companies finally to die.
But the biggest impact on the old Korea Inc. will be the level of foreign influence on the economy.
By the end of next week, foreigners would be allowed to take majority stakes in listed Korea firms and conduct "friendly mergers and acquisitions."
All individual limits for foreign investment in corporate bonds have already been lifted and foreigners will be given greater access to the government, special and convertible bond market by the end of next week.
With interest rates at more than 30 percent in the bond market and the stocks hovering near a 10-year low, foreign investors are just waiting for the won currency to bottom out before piling into the Korean markets, analysts said.
The won rose sharply against the dollar on Friday to around 1,500 near the close of trading after ending at 1,836 at Wednesday's close.
President-elect Kim called on South Korean workers to change their attitude toward foreign capital, which would have unimpeded access to Korean markets under the IMF regime.
During his meeting with union leader Park, Kim said: "From now on there is no need for discrimination between indigenous and foreign capital. We are living in an era where foreign investment is more important than foreign trade.
"Workers must show their hospitality to foreign capital because our competitiveness will improve when such capital flows in," he said, according to a statement from his National Congress for New Politics Party.
The Korea Stock Exchange's key composite index surged 6.74 percent to close at 375.15 on Friday with investors believing the worst of the financial crisis had passed, brokers said.
South Korea's inability to get lenders to roll over short-term debt has been at the heart of the crisis. About $15 billion of an estimated $100 billion in short-term debt was coming due this month and another $15 billion next month.
Japanese officials said the rolling-over of existing loans by private banks to South Korea would be a precondition for support by donor countries.
In a joint statement released in New York, six top U.S. banks said they may provide supplemental funding to help South Korea. The banks said they planned to meet early next week to discuss "how such funding can be mobilised expeditiously." |
