Here it is , Art
January 14, 1998
South Korean Stock Market May Have Stabilized
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By NICHOLAS D. KRISTOF
<Picture: S>EOUL, South Korea -- What stock market around the world has performed the best so far in 1998?
Remarkably enough, the answer is the South Korean market, which rose again Tuesday for a total leap of 23.61 percent so far this year. This buoyancy, however precarious and tentative, underscores a rare bit of good news from Asia these days: After a near-death experience last month, South Korea may have stabilized for the moment.
Many investors, diplomats and government officials are far more cheery about the nation's prospects than they were just a couple of weeks ago. While the shift may prove fickle, it is striking.
"Soon, South Korea will be again on an ascending trend," Michel Camdessus, the managing director of the International Monetary Fund, said at a news conference at the end of a two-day visit. Referring to an improvement in the balance of payments and some other economic indicators, Camdessus added, "All of that signals a beginning of recovery."
Tremendous challenges lie ahead, and recovery -- even under the best of circumstances -- will involve a surge of unemployment, bankruptcies and labor unrest. Nonetheless, South Korea is now viewed more positively than almost anybody expected a couple of weeks ago, partly because President-elect Kim Dae-jung has seemed far more serious about revamping the economy than many people had expected.
The IMF strategy could use a success story because most of the news out of Asia has been bleak. Moreover, good tidings from South Korea, if they are sustained, are particularly important. South Korea's economy is far bigger than those of Indonesia and Thailand combined, and it is much more integrated than the others with the global economy and the business world of Tokyo and New York.
It is not that the worst is over, for most of the pain of unemployment is yet to come, but rather that it is now possible to see a path that the nation can follow to escape the crisis.
"In contrast to a month ago, when there was so much tension and so much stress that it was difficult to see the way out, now I think more and more people can see that there is an end to this," said Stephen Bosworth, the U.S. ambassador to South Korea. But there will be many trials ahead, and the sting of unemployment will get worse, he added.
Camdessus echoed the warning.
"You shouldn't cry victory prematurely," he said. "You have won the first battle. You have not won the war."
Investor confidence in South Korea has improved in part because the nation has appeared far more serious about carrying out the terms of the IMF bailout package than many analysts had expected. Many investors had worried that Kim , a populist with close ties to labor unions, would shy away from any moves that would result in layoffs and deep economic pain.
In fact, Kim has used his political leverage to aggressively carry out the IMF package and to make it easier for companies to lay off unneeded workers. He has also put pressure on large companies to mend their ways, and on Tuesday he reached an agreement with heads of the nation's conglomerates that will lead them to pay more attention to the market and to adopt more modern accounting methods.
Most striking, Kim is no longer denouncing the IMF bailout, as he did during his campaign for president, but is praising it as the best way to reinvigorate the national economy.
This is a blessing in disguise," Kim said in a talk with his aides this month. "The reforms that the IMF requests are things we should have done long ago."
The rise in the stock market in South Korea -- it has risen in 10 of the last 11 trading sessions -- reflects in part its tumbles late last year. But the rise is still surprising because it bucks the trend that since Jan. 1 has sent stock indexes tumbling 24.4 percent in Singapore, 18.68 percent in Hong Kong and 4.87 percent in Indonesia. The Dow Jones index has also fallen, by 2.23 percent.
In dollar terms, the Singapore market has fallen 28.05 percent this year; the Hong Kong market is down 18.68 percent, and Indonesia has declined 37.13 percent. Because the South Korean currency, the won, is worth less than half what it was a year ago, the South Korean market has risen only 12.25 percent in terms of the dollar.
But the won appears to have stabilized for the moment, and the cheap currency has helped turn around the nation's trade accounts, creating surpluses in the last couple of months. That has helped bolster confidence.
"They've been very quick to grasp the situation and turn it around," said Divyang Shah, an economist who studies Asian markets for IDEA, a financial consulting firm. "I'm optimistic on Korea."
One critical uncertainty remains South Korea's foreign debt, but the sense of crisis seems to have eased slightly. Western banks seem mostly prepared to give South Korea until the end of March to work out a resolution of the problem, and several possibilities are under discussion that would repackage the short-term loans owed by South Korean banks and turn them into longer-term debt at a higher interest rate.
"The imminent fear of default has disappeared," said Ben Limb, a lawyer from New York who is an adviser to Kim. |
