There’s one aspect to financial markets and individuals’ livelihood, which has become commonplace to economies around the world. Like the proverbial 900 pound gorilla in the room, the risks tied to stagnant labor markets are obvious. However, relative stability in Asian economic growth and Western stock markets has pushed the implications surrounding unemployment from the center of the room towards the corner. This week we’ll be focusing on the state of the labor market in Korea and how it compares to other developed markets abroad. We will identify differences in labor conditions and data collection, then look at ways that Korea can improve its employment situation for future success.

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September 2, 2010 -In 1933 the Gold Standard was pushed aside and the United States Dollar (USD) officially became tied to nothing. Later in 1944, during a gathering of global leaders in Bretton Woods, New Hampshire, international exchange rate policies were put in place to assure the system of “floating” global currencies. Yet it would be the Mr. John Maynard Keynes who went on to define this exchange of paper money as “fiat currency”, or money where the “material substance… is divorced from its monetary value”. More recently it has become crucial to have an understanding of what currencies are worth relative to each other and to actual assets, because the value of this floating paper is changing more erratically every day. Here we re going to look at what is moving Asian currencies now and whether these moves make since over the long term.

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August 12, 2010 -From a Western financial professional’s perspective, South Korea has traditionally been overlooked. The most familiar big three finance hubs in the East were forged in Singapore, Hong Kong, and Tokyo. However, Korea is redefining itself as a major marketplace for a specific breed of financial product, for better or worse, broadly labeled “derivatives”. For those having flash backs to calculus at the thought of the word, don’t fret… you’re actually on the right track. Here we’ll give a crash course on derivatives and their place in financial markets, inspect their recent appearance in emerging markets, and theorize as to the effect they will have on Korea’s global financial presence and the economy as a whole.

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August 5, 2010 -Korea is a land of limited space and high population. It’s borders surround just under one-hundred-thousand square kilometers, making the land mass a bit larger than the U.S. state of Indiana, with a population of approximately 48,000,000; over seven times that of Indiana. It’s safe to say that the result of these basic observations has for years been a high demand for real estate in Korea. This week we’ll discuss the state of the South Korea real estate market by investigating the Korean “Jeonse” (key money) lease process, deciphering broader implications of economic downturns on the industry, and looking for answers to the looming supply of unfilled apartment skyscrapers in years to come.

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July 15, 2010 -Surprising the world now twice in six months by leading rather than following the G20 nations, South Korea has spearheaded dual mandates which have put the central Bank of Korea (BOK) on the offensive. Clearly Korea hasn’t forgotten the woes of 1998 and 2008, when the KRW dropped precipitously and twice scarred the investment portfolios of international players. It is now certain that currency protection is the name of the game in Seoul. This week we’ll identify how Korea’s monetary policy stacks up against its rival “Asian tigers”, and determine where Korea may find itself tomorrow as a result of today’s environment.

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June 24, 2010 -The moment that Europe and the U.S. have been lobbying for over the past nine months finally arrived, as China ended the rule based exchange rate “peg” of the Renminbi, or Chinese Yuan, to the U.S. Dollar. While the immediate implications of a floating Yuan are positive for Asia as a whole, the mid-term reprocussions of a stronger Renminbi may tell a starkly different tale. We’ll explain what a floating Yuan means to Korea investors. We will also preview and review several market moving reports, helping to give subscribers a better grasp of current economic health and prospects for growth here in the ROK…

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June 17, 2010 –

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June 11, 2010:

The Washington D.C. summit in 2008 crowned the Group of Twenty Nations (G20) as the official global economic summit of industrialized countries. Two years in, Korea is proud to have been chosen to Chair the 2010 G20 summit, which was kicked off in Busan last week for a meeting of the group’s finance ministers. Hosting the G20 certainly represents a milestone on Korea’s global economic ascent; however, the communiqué out of Busan begs a dissimilar fate for the unification of the group. In this edition of the Korea Economic Slice on KBC, we’ll analyze the effects of the Busan G20 communiqué on Korea’s economy and take a look at market moving economic data to be released in the week ahead…

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In the fourteen days since a verdict charged the Democratic People’s Republic of Korea (DPRK/The North) with sinking the Republic of Korea’s (ROK/The South) Cheonan warship, global investors have realigned risks on the Korean Peninsula at the center of their radars. In this edition of the Korea Economic Slice on KBC, we’ll venture into history to gauge the significance of the recent alleged attack on the Cheonan and analyze the potential outcomes and economic repercussions. Then, we’ll move to identify the coming week’s crucial economic reports, technical indicators from the KOSPI, and the effects of global risks in the Korea economy…

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The pdf Link : The Korea Economic Slice Report on KBC

In this first of a new series focused on market moving financial and economic news, with regard to the Republic of

Danger on the Yellow and Aegean Seas

Geopolitical factors at home and abroad are busy pulling Korean equity indexes to levels not seen since February 26, 2010, when the KOSPI had last touched 16,000, since again touching that level yesterday (Thursday May 20, 2010).

On Thursday, according to the Korea Times,

“the Joint Civilian-Military Investigation Group (JIG), which includes 24 foreign experts from the United States, Britain, Australia and Sweden, announced a North Korean Midget Submarine Torpedoed the Cheonan [S. Korean warship] at night [on March 26, 2010, in the Yellow Sea].”    -The Korea Times

Until now, there had only been unofficial reports that a North Korean torpedo had sunk the Cheonan, which caused the deaths of 46 South Korean sailors. The attack directly violated the Armistice Agreement, signed in 1953, that had kept the two countries from direct combat for 57 years. Still, official statements from Pyongyang (the North Korean Capital) have denied involvement in the incident, and instead “consider the current situation a state of war”, provoked by the South.

The majority of the international community sides with the South as leaders carefully measure responsive actions, however China’s indecisive stance has amplified foreign concerns. Markets sold off on Thursday, on increased risk of an escalating conflict on the peninsula, while trading on Friday was cancelled due to the celebration of Buddha’s birthday.

In the far away Aegean Sea surrounding Greece, very different forces have led to similarly negative market influence over the past few weeks. The effects of destabilized Greek sovereign financing have already spread to all corners of the European Union nations, but could soon escape the continent to other corners of the globe.

The yield on medium term Korean sovereign debt had been dropping as confidence in the government and stabilizing economic recovery brought the value of both Korean debt and the Korean Won higher for the first four months of 2010.

KWN/USD vs. Korea 3-yr Treasury Yield

However, as of the beginning of May, the daily market yield on the 3-year Korea bond, and the value of the U.S. Dollar/Korean Won has risen significantly. We believe that a substantial degree of the bottoming of Korean Government debt yields, can be attributed to the contagion effect out of Greece, where the financial solvency of governments across the globe have been called into question.

On Wednesday and Thursday of last week, the KWN sold-off even more significantly, compared to the USD, as the Cheonan torpedo attack became official and inter-governmental tensions on the Korean peninsula escalated.

Korea Economic Data

Beginning on Monday at 12:00 pm, the report of Loans and Discounts of Depository Institutions (by industry) will be released for Q1 2010. The last report (Q4 2009) showed a slowing in the pace of overall loan growth in Korea, as financing to industry players dropped by -1.0%, while consumer financing still grew at 2.2%, putting the headline loan growth at 0.4% compared to 1.8% in Q3.

On Tuesday we’ll get the 2010 Q1 Korea International Investment Position report at 12:00 pm, where the previous report for Q4 2009 announced a full year 2009 Net International Investment Position (IIP) equating to -35.0 billion USD, with a change of +9.4 billion USD in 2009 Q4. The negative IIP was attributed to large inflows of foreign funds into Korean equities, as foreign investment portfolios increased exposure to Korean corporations, and as the amount of Korea’s long term external debt increased by +24.0 billion USD in 2009 (+4.5 billion USD in Q4). Investors will be watching to see if this influx of investment in the Korean stock market and Korean sovereign debt has continued through Q1 of 2010.

Wedensday we’ll see the Consumer Survey Index (CSI) for May 2010 and Household Credit Trends Report for Q1 2010. First we’ll see the CSI at 6:00 am, and its headline Composite Consumer Sentiment Index (CCSI) which has held at the 110 level for the past two months. Investors will be looking for a change in the CCSI and also the expectations for changes in Household Income and the Domestic Economic Situation, which have both trended lower to 101 and 100 respectively.  Next at 12:00 pm the Household Credit Trend report will be closely watched for a trend to form in March, following January and February’s -1.0% and 0.8% changes.

Thursday’s economic data will come in the form of the Balance of Payments Report for April 2010. The balance of payments is essentially the national statement of cash flows for a Nation, where all monetary transactions are recorded. This report will be especially important to Korean investors and monetary policy officials, since the crucial Current Account portion of the Balance of Payments has recently trended towards a “net zero” reading.

The Current Account will be closely watched for signs that the return to a surplus in February 2010 is the beginning of a trend towards higher surpluses in the future. In March the Current Account surplus grew from 0.17 billion to 1.69 billion USD on an increase of net exports of goods and services.

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Korea Current Account - January 2008 to February 2010

According to the China Post, Korea held $273.3 billion, the sixth largest reserve of USD currency behind China, Japan, Russia, Taiwan and India at the end of January 2010. The high level of foreign reserves has been explained by the Korean Central bank as it’s best means to fend off a currency crisis, but has come under criticism as the current account surplus swung to a deficit in January 2010.

On Friday markets will be faced with the May 2010 Business Survey Index (BSI) Report at 6:00 am and the April Weighted Average Interest Rate Report at 12:00 pm. The BSI manufacturing index for April rose from 99 to 103, while the non-manufacturing report also rose, from 86 to 90. However, when adjusted for seasonality, manufacturing sentiment remained unchanged and non-manufacturing declined by 4 points. Readings from the BSI are sure to be matched with readings from the Current Account report as investors look for a trend of business activity moving forward.

In the Weighted Average Rate Report we saw the average interest rate on deposits at financial institutions increase only 0.01% in march to 3.19%, pairing the drop in the average loan yield of 0.01% to 5.93%. As a result, the weighted average spread for financial institutions slightly narrowed to 2.74% on the heels of widening yields for financial firms over the past 6 months.

Looking to the week ahead, many questions regarding the strength of Korea’s economy from the stance of consumers, businesses, and international investors will become much clearer through the aforementioned econ data. However, the KOSPI Korean equity index, the Korean Won, and yields on Korean debt will continue to be heavily influenced by geopolitical factors surrounding the conflict with North Korea and developments in global financial markets, resulting from sovereign default risks in Europe.

All data and charts courtesy of The Bank of Korea, ECOS (Economic Statistics System) @ http://ecos.bok.or.kr