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Strategies & Market Trends : S&P Index Futures (Daytrading SP) -- Ignore unavailable to you. Want to Upgrade?

To: Jay Baca who wrote (155)	12/26/1997 8:34:00 AM
From: VALUESPEC	Read Replies (1) \| Respond to of 350

Japan was down 3%+ last night. S. Korea is still in big trouble, though the market was up last night (about 7%). Here's some news on S. Korea. Keep in mind that most of the money owed to foreigners by S.Korea is owed to Japan: <<Friday December 26, 6:51 am Eastern Time S.Korean industry facing "big bang," say analysts By Kim Myong-hwan SEOUL, Dec 26 (Reuters) - Soaring interest rates will prompt a ''big bang'' in South Korean industry, with survival of the fittest the order of the day, analysts said on Friday. Many of the country's highly leveraged firms would collapse in the merciless world of a new South Korean economy, they said. ''The rules of the game are simple. High rates mean money shortages and many bankruptcies,'' said an economist at the state-funded Korea Development Institute (KDI). ''They are certainly the prelude for a big bang.'' South Korea said on Thursday it would lift any ceilings on interest rates early next year and promote other financial reforms in return for $10 billion in swift aid offered by the International Monetary Fund (IMF), along with many donor countries. Seoul would also fully open up the bond market, speed up the opening of other capital markets and allow foreign banks and security firms to open wholly owned subsidiaries. Yields on South Korea's benchmark three-year corporates tripled recently to around 30 percent as the country's financial system was falling apart under the weight of the currency crisis. ''High rates will eliminate many sickly companies and keep healthier firms from expanding,'' said Koo Kyong-hoi, analyst at Dongwon Economic Research Institute. 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 falling due this month and another $15 billion next month. Fears that the country might declare insolvency pushed the dollar up to a record high of 1,995 won earlier this week, although it fell again to 1,498.0 by Friday's close. The IMF's fresh loan arrangements calmed South Korean financial markets on Friday, with stocks recovering 6.74 percent and three-year yields dropping by two percentage points. ''The crisis is far from over. Expectations of the dollar's rise still remained high,'' said an economist at LG Economic Research Institute. Analysts said South Korea may have to raise interest rates further to attract dollar inflows. ''Even high rates will not work unless South Korea regains foreign investors' confidence about its commitment to a swift restructuring,'' said the KDI economist. Dollars were drying up in South Korean corporate finance as fresh dollar borrowings became almost impossible as a result of freefalling credit ratings for South Korean companies. ''The exit for escape is narrowing every day. Business conglomerates must slim down really fast,'' said Yi Seung-kook, head of research at ABN AMRO Hoare Govett Asia. Analysts said high rates, a weak won and low stock prices would also combine to create an ideal climate for foreign corporate raiders. ''South Korea appears to have offered all it can to foreigners simply to stave off its debt default,'' said an economist at the Korea Institute of Finance. Foreigners are allowed from this month to buy 50 percent of a stock and the limit would be waived before the end of next year.>> Ultimately, what is going on in S. Korea is probably "good medicine". However, how everything will ultimately unfold, is still not known. Another Japanese trading company failed, though a smaller one this time. Japan's banking system is in big trouble, and one of its largest trading partners fell apart almost overnight (S. Korea). S. Koreas is so desperate for help, that they have now done almost eveything they have in their power to do. These reforms must work. Only time will tell. What do I see the general markets doing? Well, a new year is almost here. The big funds have tons of money and will probably be buying stocks big-time after the new year. They are probably cautious, like I am, but must invest somewhere, unlike me. I expect trading to continue to be great amoung the funds and for volitility to continue to be great as a result. The baby-boomers must be scared out of the market for this market to REALLY correct (I think, but who knows). Again, I'm not sure what that will take. Bonds are falling in early trading. Therefore, I expect the s&p to be up strongly in at least the early going. Small-caps should do particularly well in the next few weeks as they have been hit hard recently. VALUESPEC