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To: Mark Bartlett who wrote (3066)	11/12/1997 7:57:00 AM
From: David R. Schaller	Respond to of 116871

Mark, It has been widely commented that should the Japanese market close below 17,000 that it would lead to a repatriation of funds. Should this happen it would seem that the "flight to quality" (T-Bills) would be over. Higher interest rates, stocks under pressure etc. Well, 15,600 is definitely below 17,000. It will be interesting to see if selling pressure starts to build in the credit markets. This could signal a major shift is in the works. For the Japanese investor, T-Bills have been a wonderful investment. High interest, falling yen, great yield. But what happens when you need the money back & in your own currency? Should be interesting. Regards, Dave

To: Mark Bartlett who wrote (3066)	11/12/1997 8:26:00 AM
From: Bucky Katt	Respond to of 116871

South Korea, in the grip of a financial crisis, will have to turn to the International Monetary Fund (IMF) soon despite government denials, fund managers said on Wednesday. Kim Ki-hwan, ambassador-at-large for economic affairs in the finance ministry, said on Wednesday an approach to the IMF was not on the cards at present. ''We believe we can handle this problem ourselves.'' The whole thing about capitalism is the ability to fail. The whole thing about the other ism's is you were not allowed to fail. Just what is going on here???????????????? But Asia fund manager Charles Brock of Foreign and Colonial Emerging Markets disagreed saying Seoul's attitude was foolhardy. Fears of a debt repayment crises have driven interest rates higher, punished Seoul's bourse and left the won extremely fragile, fund managers said. The won is down 17 percent against the U.S. dollar since the beginning of the year and bond yields are at two-year highs. ''You have to say the odds are there will be some sort of rescue package. If there isn't god knows what they will do,'' said Dean Newman, fund manager at Invesco Asset Management. The alternative, fund managers said, would be to allow interest rates to spiral or the won to collapse, which would further impair debt-laden Korean corporations. Interest rates, currently at 13.15 percent for three-year corporate debt, have been driven by a scramble for cash as banks call in loans, fund managers said. ''They are calling (loans) in because they are feeling the pinch and they know the score,'' said Newman. ''I don't see any reason to buy Korea. The problem with the way Korea is structured and the control the government has is that good companies can be brought down with the bad. The debt problem is a problem for Korea Inc rather than individual companies,'' said Brock. IMF managing director Michael Camdessus called Korean reserves ''satisfactory,'' saying they stood at about $30 billion, but fund managers were not convinced. ''Quite what (Korean) reserves are is very unclear. There is speculation that the reserves are pretty much depleted,'' said Newman. To be sure, Newman said, the won's recent rally from just under the important 1000 barrier is proof that Korea has some firepower left and is willing to use it. ''But I think what we are seeing in both the currency and the equity market is a bit false. We will come in one day and they will both be down five percent again,'' Newman said. All agree that an IMF package cannot be struck until after December's crucial presidential elections. ''I suspect all bets are off until after then. I don't think they will actually sit down and recognise the scale of the problem they've got until we get through the elections,'' said Brock. ''This is all about politics. No one wants to see the IMF in there before next month's elections but, as far as the market is concerned, there is no way the IMF can stay out of this one come the new year,'' said one analyst at a UK bank. Until then funds expect to see further downward pressure on the won and Korean stocks, as geared corporates suffer from higher rates. ''Almost any angle you look at Korea, it looks bad,'' said Newman. Of particular concern is the growing burden of Korean corporations' short term debts. As faith in Korea's financial health has flagged, heavily geared Korean companies have been forced by their lenders to roll maturing medium-term debt into short term instruments at very high rates. The amount of Korean short-term corporate foreign debt is put at between $60-70 billion, according to Peter Irving, chief executive of Atlantis Investment Management. ''It doesn't really matter what the reserves are, be it $30, $20 or $10 billion, if you have $60 billion of short term obligations,'' he said. The grim reality in Korea, the third largest economy in Asia, will almost certainly have a larger impact than the southeast Asia crisis. ''When they finally let the currency go they are going to have to export like crazy to get any sort of cash flow, which probably means they will be dumping things like petrochemicals, steel and semiconductors. (This) has severe implications for the rest of the region and Japan,'' said Brock.