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  Korea Report - February 2007
  Author : Hwang & Co     Date : 07-03-26 09:17     Hit : 41078    
Topics.
-President Roh left ruling Uri Party.
-Government approved Roh¡¯s constitutional amendment for presidential election system.
-Uri Party lost majority in Parliament after 30 law makers deserted.
-SKorea and USA continued FTA talks with little progress.
-Japanese is reluctant to acknowledge its sexual enslavement during WWII.
-NK agreed to shut down its atomic facilities, expecting energy and humanitarian aid in return.
-SKorean and USA agreed on transition of wartime operational control by April 2012.
-Ministerial level talks between 2 Koreas started.
-Rich dividends paid by local banks to foreign investors.
-FTC eased equity investment ceiling for chaebol.
-Major refineries fined for the price rigging of their products.
-HMC¡¯s chairman Chung sentenced to 3 years in prison for embezzlement and slush funds.
-HMC¡¯s inventory in USD grows rapidly.
-KOSPI plunged following nosedive of Chinese market.
-STX to build a yard in Vietnam.
-POSCO expressed interest in merging DSME.
-SHI signed contract in multi currency payment terms, combined with KWon and USD.

GOVERNMENT AND SOCIETY

President Roh formally left the Uri Party, in an apparent attempt to give the party a fighting chance against the main opposition Grand National Party. He becomes the fourth president in Korea's constitutional history to leave his own party while in office. He is also the first president to sever ties with a ruling party twice. Roh had left the former Millennium Democratic Party in Sept 2003 to join the newly created Uri Party.
Prime Minister Han Myeong-sook resigned and return to Uri Party, adding weight to speculation for soon to announce her bid for the upcoming presidential election.
The government approved the constitutional amendment proposed by President Roh on March 6, that would allow future presidents 2 consecutive four-year terms, and the presidential and general election to eventually take place concurrently. A number of polls showed that most people are in favor of moving to double four-year presidential terms, but most are opposed to the change under the current government. The main opposition GNP has refused to become involved in any discussions on the proposal, accusing Roh of attempting to shake up the political landscape, which is currently favoring the GNP.

The ruling Uri Party lost its majority in the National Assembly after a total of 30 lawmakers deserted to form a broader alliance to fight the opposition GNP in the Dec presidential race. After the exodus, the conservative GNP controls 127 seats in the 296-member parliament while liberal Uri was reduced to 103. The defectors formed a parliamentary negotiation bloc, which requires at least 20 members, spearheading the creation of a new centrist and reformist party by aligning with the minor opposition parties. They voiced objections to President Roh's proposed constitutional amendment, seeking US style presidential terms. The GNP is enjoying over 40% support while the Uri Party's backing sits at around 10%.

Protests related to 5 major state development projects, including the expansion of the US military base in Pyeongtaek, construction of a nuclear waste storage site in Buan, a land reclamation project in Saemangeum and 2 tunnel projects, was reported to have wasted some KW134 bil in taxpayers' money, calculated labor losses from protests, police expenditure for the social order, and wasted time due to traffic disruption..

Korean and USA negotiators completed their 4 days seventh round of talks for a free trade agreement in Washington DC, with the hope to agree on a trade pact by the end of March. Both sides need to make an agreement by the end of March to meet the June 30 deadline of the Bush administration's trade promotion authority. The TPA allows the administration to negotiate trade agreements, which Congress can either approve or reject, but not alter. The annual trade between 2 partners assumed total about $72 bil a year, the biggest deal for USA since it signed the NAmerican FTA in 1993.
Korea and USA have agreed not to impose tariffs on digital songs and movies, as the first agreement. They also made progress in the area of rules of origin for chemicals, pharmaceuticals, and plastics. But no progress was made in agriculture talks. Access to Korea's rice and beef markets becomes another sticking point.
The dispute over US beef imports raises questions about whether 2 countries can make a successful deal in time. Washington has repeatedly emphasized that full market opening to American beef is crucial to a successful trade agreement. 2 countries held a technical meeting to discuss how to define boneless beef, and whether to screen all shipments for bone fragments with X-ray machines.
Washington is trying to convince Seoul to open up its pharmaceutical, auto and agricultural markets. Seoul, meanwhile, is seeking concessions on anti-dumping regulations and relaxed quotas in the textile sector.

3 survivors of Japanese sexual enslavement, 2 Koreans and one Dutch, testified before the US Congress when the House holds a hearing on ¡°comfort women,¡± for the first time, following a resolution introduced by Rep Michael Honda, D-California, which urges the Japanese PM to apologize to the victims and calls on the Japanese government to acknowledge and accept responsibility for the sexual slavery.
As many as 200,000 women were forced into having sex with millions of Japanese soldiers during World War II. Survivors of the atrocities have come out of years of shameful hiding to decry the system of sexual slavery, describing their horrible ordeal in support of a non-binding resolution that urges Japan to "formally acknowledge, apologize and accept historical responsibility in a clear and unequivocal manner" for forcing young women into sexual slavery.
However, Japanese Foreign Minister said the US House resolution is not based on objective facts. The Japanese government consistently denied any involvement in the sexual slavery that forced girls from Korea, China, Malaysia, the Philippines and Taiwan into brothels run by its military.
After government records were discovered in 1992 that proved the involvement of Japan's military in the brothel system, Yohei Kono, the then chief cabinet secretary, issued a statement that expressed "sincere apologies and remorse," admitting the involvement of the Japanese military in the sexual slavery system. In 1995, the Japanese government established the Asian Women's Fund, which is funded by private donations without offering official compensation. Many victims have rejected the fund.
In 1996, the UN Commission on Human Rights accepted a report, urging Japanese government to issue a formal apology to the victims, offer legal compensation, and punish the offenders. In 2000, the UNESCO recommended the Japanese government offer an official apology and provide reparations. Amnesty International and ILO also issued reports to recommend similar action to UN¡¯s. In 2000, the Women's International War Crimes Tribunal on Japan's Military Sexual Slavery, a mock trial held in Tokyo, found Japanese Emperor Hirohito guilty of crimes against humanity and found that reparations should be given to victims.

The government is seeking to confiscate KW70 bil worth of assets from 41 descendants of the collaborators for Japan¡¯s colonial rule during 1910-45. The Investigative Commission on Pro-Japanese Collaborators' Property is in the process of seizing 9.4 mil sqm of land, which will be used to provide welfare to the descendants of patriots who sacrificed their lives and other contributors to the nation.

President Roh pardoned 434 convicted business leaders and politicians, including Park Yong-sung, former Doosan Group chairman and member of IOC, Former President Kim Dae-jung's right-hand man Park Jie-won and ex-President Kim Young-sam's son Kim Hyeon-cheol. Most of them have been jailed for embezzlement, tax evasion, fraud, and illegal lobbying of politicians. Daewoo Group founder Kim Woo-choong was not on the list due to his unpaid fine of KW17.91 tril. He was sentenced to 8 and a half years in prison. In 2005 alone, Roh pardoned 4.2 mil people.

The Korean government is to invest a total of KW293.4 bil in space development programs in an effort to better tap the global space industry. During 2008-2012, 6 satellites, 3 multi-purpose ones named Arirang, a communications and weather satellite, and 2 science and technology satellites, are to be launched. Currently, Korea has 2 Arirang satellites and one multi-purpose satellites planned for launch in 2012. For the satellite launch vehicle program, the government will invest KW96 bil in developing the vehicle and KW38 bil on constructing a space center.

A Taliban suicide bomber killed more than 14 people including a SKorean solder, army Sgt Yoon Jang-ho, 27, outside the main US military base in Afghanistan, reportedly aiming at visiting US VP Dick Cheney. More than 27 were reportedly wounded. About 210 SKorean troops, 60 medics and 150 engineers, have stayed in Afghanistan since 2002. Yoon is the first SKorean solider to be killed in a terrorist attack in Afghanistan. Korea has been planning to pull out its forces by the end of this year. Seoul has also deployed 2,300 troops to Iraq and set to dispatch a battalion of 350 peacekeeping soldiers to Lebanon. SKorea reaffirmed its continued commitment to supporting the US-led coalitional forces in Afghanistan despite a suicide bombing that killed a SKorean soldier.

Toby Dawson, 28, the bronze medalist in freestyle moguls at the 2006 Turin Winter Olympics, was reunited with his biological father, after 26 years separation. He was excited to find his father, Kim, a 52 year old bus driver in Busan, by DNA tests of blood and hair samples. Dawson, who was adopted at age 3 by American ski-instructor parents in Colorado, is to set up the Toby Dawson Foundation, which will assist overseas adoptees and those who are waiting to find new families. Dawson is one of more than 150,000 Korean children who have been adopted abroad in the past 50 years.

A delegation from the International Olympic Committee visited Pyeong Chang in Gangwon Province for 3 days to evaluate the city's bid for the 2014 Winter Olympics, against 2 other candidate such as Salzburg of Austria and Sochi in Russia. It is the city's second bid to host the event, after losing out to Vancouver for the 2010 Winter Olympic Games. The final venue will be decided in July at an IOC general assembly in Guatemala.
This winter recorded the national average of 1.7 degrees C, the third hottest since in 100 years. The Han River has not frozen for the first time since 1992, the most likely due to El Nino phenomena which has raised sea surface temperatures by 1.5 degrees C.

NORTH KOREA AND NATIONAL DEFENSE

Six way talks on NK¡¯s nuclear crisis reached a deal under which NK agreed to shut down its five-megawatt Yongbyon atomic facilities within 60 days and to enter a "disabling" stage within a certain period, and in return, the planned energy aid comprising 500,000 tons of heavy fuel oil and some electricity, together with humanitarian aid are to be provided. For the supply of 500,000 tons of heavy oil, SKorea and other 4 parties should pay $30-40 mil respectively. When the North's dismantling process goes well, the parties are believed to construct new light-water reactors for NK, which would cost them KW1 tril ($1.1 bil). While 6 parties agreed to equally share the cost of providing corresponding energy aid to the North in return for its nuclear dismantlement, SKorea has volunteered to take charge of the first 50,000 tons, worth KW20 bil ($21.35 mil). The oil will be in exchange for NK's shut-down and sealing of its Yongbyon nuclear facility with confirmation from the IAEA inspectors within 60 days. The 6 member countries of the nuclear talks are to form and mobilize 5 working groups, including energy aid, NK's denuclearization, and peace for Northeast Asia, within 30 days to plan NK's shutdown of its nuclear facilities. The next six-party talks will open on March 19.
Japan made it clear not to provide any assistance to NK and not to shift sanctions, unless the abduction issue is solved. NK has admitted to abduct 13 Japanese nationals during 1970-1980s and allowed 5 to return to Japan in 2002, but Japan suspect there are more Japanese still living in NK.
Many foreign investors appear to take a wait-and-see approach to find out whether the latest accord actually leads to the end of the nuclear tensions, as they have seen in the past how fragile a deal with NK can be.
SKorea's main opposition GNP, who has long been critical of the government's assistance programs to the North, requested to refrain from taking a leading role in the aid proposal, as the aids have served only to extend the life of Kim Jong-il regime.
President Roh's popularity ratings shot to 20.9% from 16.9% after the six-party breakthrough.

SKorea and USA agreed in Washington that Seoul will recover wartime operational control of its armed forces by April 17, 2012, and that their Combined Forces Command will simultaneously be dissolved, as USA accepted SKorea's request that the transition should be proceeded at a measured pace to give Seoul enough time to prepare for the change. Last Oct, both sides agreed to transfer wartime control sometime between Oct 15, 2009 and Mar 15, 2012. SKorea handed over wartime command of its troops to the US-led UN forces during the 1950-53 Korean War. SKorea regained peacetime control of its troops in 1994.
The agreement met with immediate protests from the conservative politicians, veterans and activists in Seoul who are concerned that the change would weaken Korea's defense capability and undermine the military alliance between 2 countries. The opposition GNP demanded to renegotiate after a new administration takes office in Korea in Feb 2008.

SKorean Unification Minister and NK's chief councilor of the Pyongyang Cabinet started 4 days the inter-Korean ministerial meeting in Pyongyang from Feb 27, the 20th in 7 years, and 2 weeks after the breakthrough nuclear deal in Beijing and in 7 months since the last round of high-level inter-Korean talks. NK requested a resumption of SKorea's annual aid of some 500,000 tons of rice and 350,000 tons of fertilizers, suspended since NK's missile launches last July. Among other pending issues are the resumption of separated family reunions, test operations for cross-border rail and Seoul's provision of raw materials for manufacturing in return for minerals.
Pyongyang's claim following the missile tests that its nuclear and missile development under the "military-first policy" was to "protect the South against external threats" is still ringing the ears of southern citizens, causing their outrage to halt the rice and fertilizer shipments.

ECONOMY AND POLICY

Samsung Economic Research Institute predicted that Korea¡¯s export in 2007 is expected to expand 4.1% in the first half and 4.5% in second on year, upgrading its previous forecast based on better-than-expected global economy. Korea¡¯s GDP grew 4% in the fourth quarter in 2006 on year, the slowest annual pace in 18 months.

Exports in Feb climbed 11.3% on year to $26.5 bil, after rising 20.9% in Jan. That was less than the estimate for a 13.1% gain in a Bloomberg News survey. Imports rose 7.5% to $25.3 bil, resulting in a trade surplus of $1.2 bil in Feb. KWon surged to a nine-year high against USDollar and JYen, making Korean products more expensive and curbing profits for exporters. KWon rose 8.6% against USDollar last year.
Korea's current account swung into deficit in Jan for the first time in 5 months as service deficit increased while exports weakened. The current account shifted from $146.7 mil surplus in Dec to $510.7 mil shortfall in Jan. BOK forecasted that the current account surplus will narrow to $2 bil in 2007, which would be the smallest in 10 years. The nation recorded a surplus of $6.1 bil in 2006.

US Lone Star Funds that controls over 60% of Korea Exchange Bank, will collect KW416.6 bil ($444.5 mil) in dividends from KEB. Lone Star, locked in a long-running legal battle with Korean prosecutors, scrapped a $7.3 bil deal in last Nov to sell KEB to Kookmin Bank. KEB declared a dividend of KW1,000 per share in its first payout in more than 10 years.
The total amount of dividends to be paid by 5 Korean banks, including Kookmin Bank and KEB, Shinhan Financial Group, Industrial Bank of Korea and Citibank Korea, to their foreign shareholders stands at KW1.7 tril ($1.8 billion).

The BOK is considering investing some of its foreign currency reserves in overseas stocks as part of efforts to improve returns. BOK may start with $1 bil of the foreign currency reserves into overseas stock markets. The BOK has already sent a request for investment proposals to 30 offshore asset managers including Citigroup, Merrill Lynch and Schroders. Korea's foreign currency reserves stood at $240.2 bil in Jan, the world's fifth-largest after China, Japan, Russia and Taiwan.
The government will increase funding and tax breaks for domestic companies to tap overseas markets, helping stabilize foreign exchange rates. As of last year, domestic liquidity in the private financial sector stood at KW189.5 tril ($202 bil) up from KW92 tril in 2005, despite the country's high foreign reserves.

Local banks extended substantial foreign currency based loans last year due to their cheaper borrowing costs and a stronger KWon. Outstanding foreign currency denominated loans stood at $40.8 bil as of late last year, up 67% on year.
Standard & Poor¡¯s raised the rating on KEB¡¯s long term debt to BBB+ from BBB, which is the eighth highest investment grade.

China posted a $15.9 bil trade surplus in Jan, narrowing from $21 bil in Dec. Exports rose 33% on year and imports gained 27.5%. The CYuan has climbed 4.3% against the USDollar since China scrapped a decade-long peg in July 2005. The Shanghai Composite Index on Feb 27 plunged 8.8%, the steepest drop since Feb 18, 1997, wiping $107.8 bil from the market value of China's companies, which had doubled in the past year. Following shocking nosedive in Chinese stock market, Hong Kong stocks recorded the largest decline since Nov, wiping at least $239 bil off its equities, Nikkei 225 slumped further 2.9% after 9.2% tumble on Feb 27th. The Dow Jones Average slid 3.3%, wiping out their year-to-date gains. The Philippines' index tumbled 7.9%, and India's slide 2.8%.
Japanese Yen fell to a record low against the euro, the New Zealand dollar and the British pound, after the G7 industrial nations at a meeting in Essen, Germany, failed to persuade USA and Japan to strengthen their currency. JYen touched 158.99 against the euro on Feb 9, the weakest since the euro's 1999 debut. It dropped to 121.93 a USD.

Korea¡¯s direct financing soared 19.4% in Jan on month, as companies sharply increased share issues. Stocks and bonds issued by domestic companies reached KW6.60 tril in Jan, compared with KW5.53 tril in Dec. Korean institutions¡¯ investments in overseas securities shot up 54.4% on year in 2006 due to a sharp rise in investments in foreign stocks. Local institutions had outstanding investments of $54.92 bil in overseas bonds and stocks as of end of 2006, compared with $35.57 bil a year earlier.
Korean companies earned $2.1 bil in royalties last year, up 5.4% on year.

 CHAEBOL

The Korean government decided to ease the equity investment ceiling for large conglomerates as part of efforts to stimulate the economy. The draft amendment on the Fair Trade Law raise the current 25% investment cap to 40% of the net worth of conglomerates. Also under the new plan, only key companies with assets exceeding KW2 tril that belong to a business group with total worth more than KW10 tril, would face investment limits. Currently all companies that are part of groups worth more than KW6 tril are affected by the rule. Thus only 24 companies belonging to Samsung, the HMC, SK, Lotte, Hanhwa, Doosan, and Kumho Asiana will be affected by equity investment ceiling rules, while the old rules affected more than 340 companies.
The Fair Trade Commission fined 10 local petrochemical companies a total of KW105.1 bil for rigging the prices of their plastic products. SK Corp received the largest fine of KW23.8 bil and LGC with KW13.1 bil.
The FTC slapped fines of KW52.6 bil ($54.5 mil) on 4 major oil refineries, such as SK, Hyundai Oilbank, GS Caltex and S-Oil, for illegal price-fixing of petroleum products such as gasoline, diesel and kerosene in 2004. Top refiner SK faces the largest fine at KW19.2 bil, followed by GS Caltex's KW16.2 bil, Hyundai Oilbank's KW9.3 bil and S-Oil's KW7.8 bil.

Samsung Electronics Co became the largest TV maker in the world last year, both in the number of sets sold and on the revenue, securing the largest share of the world's TV market with 10.6%, while LGE came in second with a share of 9.8%, followed by TTE of China with 9.4%, Phillips 6.8% and Sony 6.2%. In terms of revenue, SEC also came first with 14.2% of the world total, followed by Sony with 11.3%, LGE 8.4%, Panasonic 8.5% and Phillips 8.3%.
SEC in the Netherlands is to wrestle away the top spot this year from Nokia by achieving a 36% share of the market in terms of revenue, thanks to camera phones and premium phones. The gap with Nokia stands at a 5%. SEC plans to sell over 1.62 mil handsets, up 20% on year, compared 1.35 mil handsets last year.
SEC was selected as the winner of the Best GSM Mobile Handset or Device award for its Ultra Edition 12.9 (SGH-D900) at the 3GSM World Congress mobile trade show. The award often called the Oscars of the mobile industry. This is the second time for SEC to receive the award.
SEC raised its sales target to KW64 tril ($68 bil), up 8% from KW60 tril in 2006, aiming to reach KW7.9 tril in net income in 2007. SEC¡¯s exports surpassed $50 bil last year, contributing to 15.6% of the nation's $300 bil in total exports.

Chung Mong-koo, 68, chairman of Hyundai Automotive Group, was sentenced to 3 years in prison for embezzling company funds of KW90 bil ($96 mil), creating slush funds of KW69.3 bil, and causing over KW210 bil worth of damage to the group, but allowed to remain free on bail. 3 other top HMC executives also received 2 and a half year jail terms after facing similar charges.
HMC¡¯s second Indian plant will begin mass production of its new minicars in Oct. The new assembly line will allow HMC India to double annual production capacity to 600,000 vehicles, targeting sales of 320,000 units in India and the export of the rest.
HMC's sluggish US sales have left nearly 100,000 vehicles made at its Alabama plant unsold. Including cars shipped from Korea, Hyundai's inventory in USA amounts to 171,000 units, while the appropriate level of stock is assumed at around 75,000 autos. Korean cars lost cost-competitiveness against Japanese cars as KWon's value soared. Hyundai's US sales in Jan dropped 8.2% on year to 27,721 units, while Toyota Motors posted a 9.5% increase to 175,850 vehicles and Honda gained 2.4% to 10,790 units.

POSCO chairman Lee Ku-taek renamed the CEO of POSCO by the board of directors. He joined POSCO in 1969 and climbed to the helm of the world's third-largest steelmaker in March 2003.
POSCO signed a deal with Australia¡¯s Resource Pacific Ltd to jointly develop a coal mine in Australia, securing a 10% stake in the Newpac No 1 Colliery located in New South Wales, with the estimated reserve of 250 mil tons of coal, with annual output to reach 4 mil tons stating this year.
POSCO had its long term corporate credit rating raised one level to A from A- by Standard & Poor¡¯s.

SK Telecom, Korea¡¯s largest mobile carrier, said its US mobile phone service Helio secured 70,000 subscribers with its 2006 sales of $47 mil, where they have a joint venture with the US internet service provider Earthlink Inc.
SK Corp, Korea's largest refinery, bought a 25% stake in the 15-1/05 oil field from Petrovietnam, as its second energy investment in Vietnam. The company currently holds a 9% stake in the neighboring 15-1 reserve, which has secured about 300 mil barrels of crude oil and over 3 tril cubic feet of gas. SK is currently tapping 25 oil fields across 14 countries, having secured about 440 mil barrels of oil reserves so far. SK's oil development business turned in about KW215 bil ($228 mil) in operating income last year, which accounted for nearly 20% of its total earnings.

Daewoo International Corp, Keangnam Enterprises Ltd. and Hyundai Engineering have jointly received an order to build a $180 mil power plant at a nickel mine in Madagascar, Africa. They won the order after Daewoo Int and Korea Resources Corp secured a 27.5% stake in the Ambatovy nickel project in last Oct to spend $1.1 bil over 5 years to develop a nickel mine there. The cogeneration power plant will supply 80 megawatts of electricity and 235 tons of steam an hour to a nickel refining plant when completed in Sept 2009.
Korean builders¡¯ combined domestic orders amounted to KW107.3 tril last year, up 8% on year, driven by increased demand for redevelopment in the private sector.
Daelim won the world largest Poly Carbonate project from Saudi Kayan Petrochemical worth $1 bil, with the annual production of 260,000 ton after completion in 2010.

LGE has filed a patent infringement suit in a US court against a Chinese electronics company TCL Thomson Electronics of violating 4 of LG¡¯s TV-related technologies.
LGE has set a global sales target of 78 mil mobile phones this year, and plans to build a premium brand image. LG made successful inroads into the European GSM open market last year by selling over 7.5 mil of its line of Chocolate phones. LGE target to sell Chocolate phones at over 10 mil units this year.
LGE won the common procurement project 3G mobile phones planned by 12 globally leading mobile carriers, after the competition against 8 world leaders including Nokia, expecting the sales more than 10 mil sets a year.

Doosan Heavy Industries & Construction, Korea's largest maker of electricity-generating equipment, received a $139.8 mil order to supply a power plant for Foundation Power Co of Pakistan, in the city of Daharki, Sindh province, for the completion by April 2009. Doosan's overseas orders almost doubled to $1.05 bil last year, as the company signed contracts to build power plants in Oman and UAE and got the orders from General Electric for steam turbine generators.
Doosan held ground breaking ceremony in Dung Quat, to construct production center in Vietnam for desalination plant, HRSG, transportation equipment. The construction will be managed by Doosan Heavy Ind Vietnam to complete the plant by 2009, with the investment of KW180 bil.
Doosan Heavy won the project to build No3 and 4 Atomic Power plant worth KW1.7 bil in Shin Kori Korea.
Doosan received the order from Jordan to construct 370 MW class composite oil fired power plant worth $200 mil in Almanaka to complete by Aug 2008.

Daewoo International signed the contract with Azerbaijan¡¯s state-run transportation company Transgeyt to export 1,000 buses worth $60 mil.
DHL expanded its express facilities in Incheon International Airport by the additional investment of $25 mil this year in addition to $50 mil in 2006.
Daehan Electric Wires won the orders for wires from 2 power plants in US east coast, including the Progress Energy in Florida. It is worth $60 mil, the biggest since it established American sales office in 2001.
 
MONETARY AND ECONOMIC INDICES

Korea Composite Stock Price Index dropped in the beginning of the month to 1382 reflecting Jan market of disappointing bourse, rose to 1443 on USFR¡¯s Bernanke¡¯s remark that inflation pressures are beginning to diminish, then hit 1470, the highest in the bourse history with foreigners¡¯ and individuals¡¯ heavy buying rally on the merit of low share prices in Korean market and continuous renewal of record in US Dow index, and plunged at the end of the month to 1417, sliding 2.6%, following the nosedive of Chinese market by 8.84%
The exchange rate of KWon against USDollar has been stable throughout the month in the box of 932-942, however, KWon strengthened against JYen to 769.9, the lowest since Oct 1997, as G7 failed to make any measure to strengthen the JYen. The foreign exchange reserve in Feb expanded by $2.58 bil from Jan to reach $242.81 bil.
BOK kept the key interest rate unchanged at 4.5%, steady at the current level for the 6 month in a row. The yield for 3 years corporate bond kept stable in the range of 5.23-5.37% through the month. Korea¡¯s import prices fell 2.6% last month on month due to a decline in the prices of imported raw materials.
 
SHIPBUILDING AND SHIPPING

STX Shipbuilding has been approved by Vietnam Government to build a $500m shipyard in Van Phong Economic Zone in Khanh Hoa province. The first phase the shipyard was reported to have an annual capacity of 0.9m DWT and 2.5m DWT in second phase.
SHI and DSME won the orders to build 8 LNG carriers from Qatar Gas Transport Co, valued at $2.37 bil.
Korean shipbuilders were outpaced by their Chinese yards in terms of new orders received in Jan. New orders at Chinese shipyards totaled 1.4 mil CGTs, which accounted for half of all new orders in the world, while Korean shipbuilders won 600,000 CGTs. 
POSCO has expressed interest in DSME, which is slated to go on sale around Sept, who uses nearly a mil tons of steel plates annually.
SHI signed the contract with BP to build a FPSO worth $400 mil in the multi currency payment terms, for the first time in the industry, with 42% in USD and the rest in KWon, aiming to prevent adverse effect of currency fluctuation.
HHI won a contract with Korea Aerospace Research Institute to erect the satellite launching basis for the completion by Oct 2008. It will make Korea 9th country with the facility to launch man made satellite.

HMD won from Claus-Peter Offen for 4+4 x 52K chemical/pc.
DSME got the order from QGTC for 4 x 210K LNGC, an European owner 1 x 170K LNGC, Chandris 2 x 180K capsize bulker, Odfjell 1 x Semi submersible Drilling Rig and Repsol 3 x 173K LNGC.
SHI received the orders from QGTC for 4 x 266K LNG carrier, International Andromeda Shipping 2 x 115K pc and BP 1 x FPSO.
STX won the orders from Formosa Plastics Marine for 2 x 70K LR1 pc and 2 x 50.4K pc, STX PO 3 x 45.8K pc and 4 x 6,700 PCTC, and Parakou Shipping 6+6 x 58K bulkers to be built in its Dalian yard. STX set to bag more than $1bn-worth of bulker orders from various shipping companies, including Angelicoussis for 6 x 176K, other numerous owners 15 x 58K supramaxes Dream 58. STX was selected by Gas Natural and Repsol for 2+1 and 1+1 each x 173.6K LNGC.
Hanjin secured orders from Kaptanoglu group for 2+2 x 114K tankers.
SungDong got the order from Phoenix Energy Navigation for 2 x 171K bulkers.

Korean merchant fleet has expanded 27% in 3 years to 611 ships of 15.24 mil GTin 2006 from 433 units of 11.97 mil GT in 2003.
Hanjin is to commit its Hanjin Tenjin and Hanjin Sharman, 6500 teu new container ships, which will be delivered in Feb and March, into Far East Europe Express Service.