Author : Hwang & Co
Date : 05-05-17 15:02
Hit : 19151
-A feud between Japan and Korea-China flared up by Japanese history book and new claim to Dokdo. -Ruling Uri Party suffered crucial defeat in by-election. -KNR accused for the development of oil field in Russia. -NK stopped nuclear reactor with the suspicion to remove further spent fuel rods. -Tax office investigate foreign investors over possible tax dodging. -5% rule applied to foreign investors. -Samsung signed a deal to sponsor Chelsea Football Cub. -Hite Brewery bid highest price to acquire Jinro Soju. -KOSPI dropped to 911. -Kwon against USD strengthened to below 1000. -New building fever seemed to cool down.
GOVERNMENT AND POLICY
Japanese Education Ministry approved textbooks made by 8 publishers. Boldly ignoring warnings from both Korea and China, the finalized new textbooks not only still carry numerous distortions of history, but also add new claims to Korea's Dokdo Islands, leaving Korea no other choice but to proceed with firm countermeasures against Japan's incessant attempt to beautify its wartime atrocities. Korea¡¯s Foreign Minister demanded Japan immediate correction of its history books and erase the part of Dokdo island. Korean government publicly declared that it will block Tokyo's bid for a permanent UN Security Council seat. Korean Ambassador to the UN told reporters in New York, there are limits for a country to play the role of a world leader if it doesn¡¯t have the trust of its neighboring countries. President Roh Moo-hyun expressed in the press conference during his trip in Germany that it is unfortunate for the mankind on the world to live with the people who glorify their invasion and doing harm to the neighbors. Although the magnitude of anti-Japan campaigns is strong in Korea, China¡¯s violent rallies, damaging Japanese supermarkets and burning the Japanese flags in various cities, have visibly outshone those in Korea. In recent weeks, Chinese organizers claim to have collected more than 24 mil names on an internet petition demanding that Japan would be denied a permanent UN Security Council seat, claiming it has failed to apologize for wartime aggression against China. China¡¯s officials added Sino-Japanese relations are at a crossroads, as Japanese leader repeated visits to the Yasukuni War Shrine. Japan¡¯s top government spokesman said that the boycott of Japanese goods advocated by a group of Chinese retailers would hurt China's economy and would probably not be tolerated by Beijing. Japanese Foreign Minister summoned China's ambassador to protest the rally and demand compensation for damages. Japanese Prime Minister apologized, during the meeting with his Chinese counterpart for the tremendous damage and suffering caused by Japan¡¯s wartime past in an apparent effort to help douse a flaming row with China. China criticized Japan's decision to allow gas drilling in a disputed sea bed as a serious provocation, adding to tensions that ignited violent street protests over Tokyo's bid for a permanent UN Security Council seat and its portrayal of wartime atrocities.
The ruling Uri Party suffered a crushing defeat in crucial by-elections as it failed to win a single parliamentary seat while the main opposition GNP swept up 5 seats, undermining President Roh's push to pass controversial reform bills that include abolition of anti-communism laws. GNP's success in the voting blocked Uri from regaining a majority. Uri now holds 146 seats in the 299-member National Assembly, while the GNP has 125, the minor Democratic Labor Party 10, the Millennium Democratic Party 9, the United Liberal Democrats 3, and independents the rest. Opposition GNP's leader Park Geun-hye criticized President Roh's vision of SKorea¡¯s role as a Northeast Asia balancer, warning that it may harm the alliance with USA. Park¡¯s comments came after Roh stressed that the nation should help balance Northeast Asia, implying a shift from Seoul's traditional close alliances with the USA and Japan toward a neutral position among regional powers including China and Russia.
Korea signed Free Trade Agreement with Singapore, second of the kind, following Chile, expecting enhencing the competetiveness in logistic, financing and service industries. Korea-Japan will cooperate to increase their IMF quota to boost their influence within the global body. They also agreed to push FTA talks in order to sign a pact by end of this year, despite political acrimony. Korea and Vietnam agreed to boost the cooperation in the energy development field, by selling Vietnem¡¯s 11-2 field to Korea and establishing training program for manpower in atomic energy field.
The Korea National Railroad pursued joint development of oilfields on Russia¡¯s Sakhalin Island, and lost half of the $6.2 mil deposit it placed for the deal last year. KNR pulled out after the Russian firm failed to secure approval from its government. Investigators are seeking answers to what prompted it to get involved in a deal unrelated to its usual business. The opposition GNP launched an independent investigation over the contract. President Roh asked his chief of staffs to actively examine accepting the demand for a special probe if the opposition parties keep raising suspicions on CheongWaDea and people around the president.
Forest fires fanned by strong winds in the eastern part of Korea destroyed more than 430 hectares of woodlands, destroyed 246 buildings including 160 houses, burned a famed Buddhist temples and forced 2,000 people to evacuate their homes. Government designated Yangyang as a special disaster zone, providing emergency financial aid to farmers. Soft loans of KW10 bil will be extended to farmers who suffered damages from the fires. Government spent KW48.1 tril in an attempt to pump up the stagnant economy for the Jan-March period, KW5.2 tril more than in 2004. Government is to push for the construction of 1 mil rental homes by 2012 to stabilize property prices and improve residential stability for low-income earners. Korean researchers have found a switching mechanism for C-terminal binding protein (CtBP) that can be developed to starve selectively cancerous cells.
NORTH KOREA AND NATIONAL DEFENSE
President Bush called NKorean leader Kim Jung-il a tyrany and dangerous man, warning that if NK does not come back to 6 way talks for nuclear standoff, USA should have no choice than to bring the matter to UN Security Councel. US Secretary of State said USA reserves the right to seek UN Security Council action on NK but remains committed for the time being to seek a negotiated end to NK's nuclear weapons program. Korean government clearly opposed to taking the NKorean nuclear standoff to the UN Security Council or restricting economic aid to NK. The nuclear issue remains tense since NK announced that it possesses nuclear weapons, boycotting 6 party talks, and indicated to remove spent fuel rods from a nuclear reactor beginning April, a move that can give it enough fissile material to double its suspected nuclear arsenal. The unloading, which may take about 3 months, will give it about 8,000 spent rods that can be reprocessed into enough plutonium to make 6 to 8 nuclear bombs. SKorea warned NK that it will face further isolation if it goes ahead with nuclear tests. USA retained NK on its latest list of terrorism-supporting countries, accusing it of failing to cooperate in international efforts to fight terrorist acts.
US Forces Korea announced to cut about 1,000 SKorean contract employees, as an apparent reaction to Korea¡¯s reduced financial contribution in maintaining American troops in Korea. Over the next 2 years, USFK is to reduce about 20% of its logistics contracts, including construction and personnel management. Defense Minister ruled out a renegotiation of SKorea¡¯s financial contribution to USFK despite the US military's discontent over the tentatively agreed cost sharing agreement. USFK announced it will deactivate an aviation brigade and move out one Apache attack helicopter battalion as part of efforts to transform its troops into an easily deployable force to any regional emergencies. The relocation is part of the USFK troops reduction plan already agreed between 2 allies, which will reduce the number of American troops to 25,000 by 2008.
Defense Ministry announced that nearly 300 troops will be withdrawn by June from the 3,500-strong SKorean contingent deployed in northern Iraqi city of Irbil, in a move that could cause diplomatic friction with Washington. But SKoreans will still be the third largest in the US led military coalition in Iraq after USA and Britain. Defense ministers from SKorea and Russia agreed to establish a hotline for aviation information exchange between the 2 countries and facilitate bilateral military cooperation.
President Roh urged NKorean leader Kim Jong-il to visit SKorea to promote peace on Korean Peninsula, and asked him to return to 6-party talks. SKorea decided not to offer additional fertilizer or food aid to NK until inter Korean talks resume. SKorea abstained from voting on a UN resolution condemning NK¡¯s human rights abuses. Defense Ministry plans to deploy 250 robots with combat capability every 1 kilometer each along the heavily fortified inter-Korean border as part of revamped security measures to deter NKorean infiltration. Officials from both Koreas met in NKorean city of Geaseong for talks on helping the state combat a bird flu outbreak.
ECONOMY AND POLICY
KDI predicted Korea's economic growth rate fall to around 4% in 2004 due to slowing exports and the weak construction sector, while the World Bank cut its growth estimate to 4.2% from the previous 4.4%, and the Asian Development Bank raised to 4.1% from its earlier forecast of 3.6%.
Korea's current account surplus widened to $1.22 bil in March due to brisk exports. The figure compares with a $910.7 mil surplus a year earlier and $969.3 mil in Feb. In the first 3 months of 2005, the surplus reached $6.57 bil. The facility investment increased to KW1.63 tril in first quarter, 127% up on year, reflecting positive expectation on economic recovery. Overseas direct investment by Korean companies and individuals rose 14.4% on year to $1.82 bil in the first quarter, encouraged by the improving global economy. Korea's industrial output rose 4.8% in March on year, the fastest growth in almost 3 years. The consumer expectations index rose to 102.2 in March, up from 99.4 in Feb and 90.3 in Jan. It was the first time that the index rose to above 100, indicating that optimists outnumbered pessimists.
Korean tax authorities are investigating 7 foreign investors operating here, including Newbridge Capital, Carlyle Group, Lone Star Funds and Citigroup, over possible tax dodging. The investigation is expected to focus on whether the funds sneaked money into overseas tax havens to avoid domestic sources, declaring it would thoroughly investigate suspected tax evasion regardless of nationalities, as to ensure fairness and transparency. Newbridge, the first foreign company to invest in a Korean bank after the 1997-98 Asian currency crisis, is believed to have reaped KW1.8 tril ($1.7 bil) from the $3.4 bil sale of Korea First Bank to Standard Chartered Plc this year. However, the fund did not pay taxes to the Korean authority in compliance with regulations designed to prevent double taxation The Korea Securities Depository revealed that Korean companies dividend payouts to foreign investors reached almost KW3.9 tril last year.
Under the new stock exchange rule, foreign shareholders with more than 5% of a local business are required to declare whether they planned to intervene in the management of invested companies, as well as details on how they raised the capital for investment. The investors, including Golar LNG, Gevereign and Templeton Asset, who did not abide the 5% rule, will not be allowed to exercise share holders' right. Some leading economic papers, like Financial Times and Wall Street Journal, criricized the 5% rule as ultra nationalistic measure discriminating foreign capital, while S&P defend the measure as it has been conventionally exercized in many countries before. . Since USA observed the heaviest trade deficit of $162 bil against China last year, the pressure to China to give up its Yuan peg system growing seriously from all directions including US government, parliament, industries and President. China made it clear that the revaluing Yuan would do more harm than good in global economy. China has been floated up as second largest trading country in the world, putting aside Japan to third. UN predicted China's GDP growth at 8.5% this year and 7.8% in 2006. China plans to build 40 nuclear power plants over the next 15 years, making them the main power source for its booming east coast
BOK said that it will not diversify its rising foreign reserves, since such a measure can further strengthen the won against the US currency. BOK is to issue currency bills with new security features next year, spending KW470 bil to combat an explosion of counterfeit banknotes. Kookmin Bank posted higher-than-expected net profit of KW345.3 bil in the first quarter, increased 128% on year. Operating profit doubled to KW678 bil. A consortium of Hana Bank with its largest shareholder, Singapore's Temasek Holding Pte, has received approval from a state-run asset manager to buy Daehan Investment & Securities for KW475 bil, ending 8 months long negotiation.
Samsung Electronics¡¯ (SEC) first quarter net profit tumbled 52% on year to KW1.5 tril, on strong domestic currency, high inventories and falling prices. Operating profit also nosedived 46.4% to KW2.15 tril and sales fell 4.2% to KW13.8 tril. SEC signed a 5-year deal to sponsor Chelsea football club, the leader of the British Premiership, which is the company¡¯s second-biggest partnership deal after the Olympic Games, for reported worth at $95.75 mil.
LG Electronics (LGE) expects its annual sales of domestic appliances to reach $14 bil by 2007, becoming the worlds top maker. LGE and Matsushita agreed to amicably settle their dispute on the patent right for Plazma Display Panel, after a year long accusation and counter court proceeding. LG Card raised KW50 bil selling 3 year bonds, its first sale of debt, maturing for longer than one year in 26 months. GS Caltex decided to develop 5 oil fields abroad to replace 10-15% of its current oil import.
Hynix received creditors' approval for a $1.5 bil debt refinancing plan that will allow management to regain control of the world¡¯s second largest memory chipmaker 20 months ahead of schedule. Hynix laid the cornerstone of its jointly owned semi-conductor plant in Wuxi, China, reinforcing its position for worldwide computer memory-chip distribution. US Ministry of Justice imposed the penalty of $185 mil to Hynix for the price manipulation on its DRAM, which was the third largest fine in US history. Infinion has been penalized last year with $160 mil.
Hyundai Motor (HMC), which led first-quarter sales growth among carmakers in China, has set up a $30 mil company in the country to better manage 21 local affiliates that make everything from parts to steel sheets. The company sold 56,064 cars in China in the first quarter, more than double on year. It is aiming to sell 1 mil cars a year in China by 2010, a fifth of the country's market share for passenger cars. HMC India's exports soared 95% to 82,093 cars last year while sales in the South Asian countries rose 9.5% to 142,150 units. Kia Motors is to invest $70 mil to build headquarters for its US unit in Irvine, California, to accommodate growth in the worlds largest auto market. The Seoul Motor Show 2005 opened to the media with Korean automakers unveiling 10 new models under the exhibitions theme ¡°Endless Surprise in Our Motor Life¡±. 39 auto companies from around the world participated with the display of more than 200 vehicles.
Kim Woo-choong, founder of Daewoo Group who became a fugitive following the conglomerates collapse in 1999, is now on the wanted list of Interpol. SKorea's National Police Agency recently requested Interpol to make public through its web posting that there is a warrant for Kim's arrest. Daewoo Int has determined the quantity of gas discovered in the waters off western Myanmar, called Block A-1, which holds two gas layers with a total thickness of 63.2 meters. Daewoo Int secure the contract from Saudi for the supply $61 mil worth steel mill facilities.
Doosan Heavy Industries & Construction (DHIC), Korea's sole maker of power generating equipment has won Qatar's biggest-ever desalination plant order, a 4 year project worth $270 mil to produce 270,000 tons of soft water. DHIC has also secured a $260.8 mil order from Kuwait to build a desalinization plant. Doosan won orders for large desalinization facilities equipment totaling $1.15 bil last year. DHIC and its units reached a final agreement to acquire Daewoo Heavy Industries & Machinery for KW1.69 tril from Korea Asset management Corp.
Korean Aerospace, the nation's sole aircraft maker, exported its first F-15K wings and front fuselages to Boeing. This follows its $90 mil agreement with Boeing in 2002 to sell wings and front fuselages for the F-15K fighter jets, which the Korean government scheduled to deploy its aging military aircraft. Poongsan won the order to supply 350 mil blind coins to Thailand.
A Hite-led consortium has emerged as the front runner to acquire Jinro Soju, as it offered the highest price, reportedly about KW3.1 tril, through the competetion among 10 consortiums. The emergence of Hite Brewery would position the nation's No.1 brewer into a dominant player in the local liquor market and a global brand. Midsized investment firm Mirae Asset Group has offered to buy SK Life, a month after US life insurer Metlife broke off talks to buy the firm. POSCO recorded the biggest earning in its history, in first quarter, posting operating profit of KW1.31 tril, 10.04% up on year, on the sale of KW5.656 tril, 0.84% up.
MONETARY AND ECONOMIC INDICES
Korea¡¯s composite stock price index started at 981 at the beginning of the month, rose to 991 once, and kept sliding due to high oil prices, on deteriorating US economy and SEC¡¯s worse-than expected performance, then ended the month at 911. KWon exchange rate against USDollar has been fluctuated in the range of 1015-996, on speculation of revaluation CYuan and interference of BOK, and ended the month at 996, the lowest in 7 years. Korea's foreign reserves increased to $206.38 bil as of end April, up $0.93 bil from March. Foreign currency deposits at banks in Korea fell in March from Feb as companies withdrew their saving to pay oversea¡¯s debt. Residents foreign currency deposits dropped to $15.47 bil as of end March from $16.22 bil a month earlier, marking the fifth straight monthly decline. BOK left interest rates unchanged at a record low of 3.25% as macro-economic indicators have shown mixed signals on a long-awaited turnaround. Import prices in local currency terms surged 3.2% last month from Feb, gaining for the third consecutive month. Korea¡¯s producer prices rose 0.5% in March, 7 month high due to surging oil and raw material prices. The nations unemployment rate inched down in March to 3.9%, from 4% in Feb.
SHIPBUILDING AND SHIPPING
The number of new building inquiries has been substantially reduced and the general atmosphere in new building starts to show somewhat cooling down, caused by late delivery and excessive pricing, while container segment continues to book the delivery slots for the remaining capacity in 2008 and well into 2009. Shipbuilders expect new building prices to increase further, however ship owners are doubting if they have to build the ships on such high prices or wait for a while in the hope the heat wave may be ceased in a few months.
HHI signed contract with P&O Nedlloyd for 5 x 8600 teu, 2 of which will be built in Samho, , Japanese owner 4 x 6500 teu, Dorian 1 x 82K VLGC, Bergesen 2 x 82K VLGC, CMM 3 x 82K VLGC and Primorsk 2 x 104K tanker. It increased the number of LPGC to 17 units in its order book, taking 60% of world share. HHI was paid $10 mil by Exxon Mobil as a token of gratitude on timely delivery and high quality of a FPSO, whose contract value is $800 mil. HHI received order in first quarter for 43 ships of 3 mil GT, worth $4.2 bil. Its order book is filled with 223 units of 15.39 mil GT for $17.1 bil, good for 45 months work. HMD won the order from CP Offen for 8 x 1800 teu and Japanese owner 2+4 x 47K PC.
DSME got the order from Pacific Star for 3+3 x 306K VLCC and Exmar 2 x 84K LPG. DSME has also started on-ground construction, enabling it to overcome space shortage at its existing shipyards for the backlog of orders. The bow section of the 171K bulk carrier was built on land, while the stern was built in a conventional dry dock. Daewoo Mangalia received order from Hamburg Sud for 6+4 x 5200 teu and NSB 4 x 4860 teu. The company becomes successful example for the establishment of DSME's global network. SHI continued LNGC contract by signing with ChevTex for 2+2 x 155K LNG. STX won the order from Parakou for 4 x 51K PC and NYK 2 x 2700 teu. Hanjin got European owner for 5 x 3100 teu.
Korean ports began denying entry of oil tankers in single hull, as UN's rules governing came into effect. Local companies are banned from operating single-hull oil tankers that have a capacity of more than 5,000 tons. Despite adverse effect of strong KWon, Hanjin Shipping posted operating profit of KW168.9 bi in first quarter, 4.2% up on year, net profit KW145.2, 8.6% down, on the revenue of KW1.44 tril, 3.0% down. HMM has kept expanding tanker operation, taking a third Suezmax tanker Faultless, 154,970 dwt '92 built, on 5 years charter, following its fixture of 2 suezmax tanker from OMI for 7 years. HeungA Shipping turned into net profit of KW14 bil in 2004 from a loss of KW4.1 bil in 2003, on the revenue of KW646 bil up 11% on year. HeungA graduated from court receivership late last year.