The Korea Times

South Korea joins gold rush

BOK moving to revamp strategy by diversifying away from dollar By Kim Jae-kyoung Korea’s central bank has been in the limelight among global investors and policymakers after it announced Tuesday the purchase of 25 tons of gold between June and July, joining a global wave of chasing gold as a guard against the collapse of the U.S. dollar. The amount was small but the purchase has had large repercussions for the markets both at home and abroad as the move came amid growing disputes over whether ongoing gold rallies are the beginning, or the end, of the bubble. The BOK’s purchase has supported expectations that the official sector (central banks) will continue to remain in favor of the yellow stuff on the back of debt crises in the U.S. and Europe. It was the BOK’s first appearance in the precious metals market in more than a decade. The purchase has hiked its gold reserves from 14.4 tons to 39.4 tons. In dollar terms, its gold holdings now total $1.32 billion, around 0.4 percent of the total foreign reserves valued at $311.03 billion. It would also raise its global

Aug 7, 2011By Kim Jae-kyoung

Economy

High volatility likely to persist in BRIC markets

Global equity markets entered a phase of panic selling last week. Fears over a sharp slowdown in global growth alongside a spike in sovereign yields across the Eurozone have provoked a sudden flight to safety. Key current investment debates center on the ability of the U.S. and the Eurozone to meet the structural challenges of reducing debt burdens and regaining economic competitiveness, thereby returning to trend growth and full employment. The relative economic strength of the emerging markets is likely to lead to further capital allocation, inflows and currency appreciation over the long term. Brazil High volatility is likely to persist in the near term, with markets reacting to key economic data and the ability of key Eurozone countries Spain and Italy to rollover debt at affordable yields. Brazilian investors will also be paying close attention to retail sales data and the second-quarter releases from the banks and homebuilders, with credit quality and receivables management among the key focal points. Any further announcement by the ratings agencies regarding the U.S.

Aug 7, 2011By Kim Jae-kyoung

Economy

What chief financial executives must know in investment

By Yoon Kyung-sik As more and more companies are encouraged to expand into rapid-growth markets, chief financial officers (CFOs) are even more frequently asked ― and sometimes pressured ― by boards and investors to outline how they are capturing the potential in the new overseas markets. Where others see primarily opportunity, the CFO must be able to spot “complexity” ― the costs both manifest and hidden. And this requires not just an initial investment evaluation on the pre-entry stage but a continuous scrutiny throughout the entire life cycle of the investment. Since every rapid growth market has its unique opportunities and challenges, it would be difficult to generalize the practical implications of the recent Ernst & Young research for CFOs. But we believe that they should bear in mind the following “lessons” when considering an investment in rapid growth markets. ● Place investment strategies under the microscope. Unlike CEOs who might get excited more easily about the prospects with rapid-growth markets, CFOs should have a key responsibility to evaluate strategi

Jul 29, 2011By Kim Jae-kyoung

Economy

Hidden costs of entering emerging markets

CFOs risk profitability by underestimating rapid-growth market costs By Ernst & Young Global companies are seeing more and more opportunities in rapid-growth markets including the BRIC countries and even less familiar ones like Indonesia, Thailand, Mexico and Ukraine. While potential rewards of investment are undeniable, so are risks and the likelihood that budget overruns might temper future growth prospects. More than a few companies, however, risk profitability by underestimating the costs and time involved in entering rapid-growth markets according to a recent Ernst & Young report, based on a survey of 921 chief financial officers (CFOs) around the world as well as in-depth interviews with finance leaders from developed and emerging markets. Our study suggests that CFOs should not assume that rapid-growth markets are also low-cost ones. Among the survey respondents, more than one-third (36 percent) said the overall costs of investing in these markets were higher than expected and nearly half (43 percent) said the investment took more time than anticipated. ``What

Jul 29, 2011By Kim Jae-kyoung

Economy

Capital market overhaul

― Seoul advised to seek a balance between growth, risk in fostering IBs ― By Kim Jae-kyoung Last Tuesday, Seoul took a long-awaited, bold step toward upgrading the domestic capital market by announcing a plan to loosen regulations on the creation of home-grown investment banks (IBs), which many believe will pave the way for local securities companies to be competitive players in the global market. The move by the Financial Services Commission (FSC), the nation’s top financial regulator, came as part of its revision to the capital market law aimed at countering changes in the global financial environment following the 2008 financial crisis and bolstering the local capital market. Under the revision, which is subject to approval by the National Assembly in October, brokerages with an equity capital of over 3 trillion won ($2.8 billion) will be allowed to become IBs. The average equity capital of the country’s top five brokerages ― Daewoo, Woori, Samsung, Korea and Hyundai ― came to 2.7 trillion won in March, only one-thirtieth of that of Goldman Sachs Group. On top of th

Jul 29, 2011By Kim Jae-kyoung

Economy

’Markets cannot exist without derivatives’

Woori Investment CEO stresses importance of fostering speculative market By Kim Jae-kyoung Following the global financial crisis triggered by the collapse of Lehman Brothers, the global economy faces a myriad of challenges and is undergoing a major transformation. Among the many changes, what is most outstanding is that the crisis has revamped U.S.-led capitalism to be “more regulated” and “less profitable,” significantly altering the look of global financial markets. At the center has been the tightening of controls over the trade of derivatives, particularly credit derivatives, such as collateralized debt obligation (CDO), or its equivalents, which many policymakers and economists believe activated the crisis. In Korea, derivatives trading has been losing growth momentum after major domestic financial groups suffered huge losses from investment in derivatives abroad in the wake of the crisis. In particular, the latest two incidents — Deutsche Bank’s option scandal and legal conflicts associated with equity-linked warrants (ELW) — put the high-risk, hig

Jul 18, 2011By Kim Jae-kyoung

Economy

Change your approach in choosing MBA schools

Canada’s Schulich offers top-tier business education for half price By Kim Jae-kyoung Canada’s Schulich School of Business at York University is not well known among Korean professionals. It is not because its global ranking is low and its curriculum is bad but because it is located in Canada. Most Korean MBA candidates are interested in top U.S. schools. When many professionals, particularly Koreans, choose an MBA school, the most important criteria are global rankings and post-graduation salaries. The curriculum and alumni networks are secondary. According to Dezso J. Horvath, dean of Schulich, Canada’s leading business school, it is time for MBA candidates to change their approach in selecting business schools as the world has changed over the past decade, calling for different elements and requirements in business than in the past. Good business schools in the global environment in Horvath’s words should not only ensure good salaries after graduation but also help their students get a “global reach” and “diverse perspectives” through their programs. “If you look

Jul 17, 2011By Kim Jae-kyoung

Economy

Challenges in a tough global recovery

Protracted global output gap makes Korean economy less resilient By Stephen S. Roach The global economy is in the midst of its second growth scare in less than two years. Get used to it. In a post-crisis world, these are the footprints of a failed recovery, with profound and lasting implications for the Korean economy. For an export-led economy like South Korea, the global backdrop has long been critical in shaping the external demand that drives macro growth. That’s become all the more the case in recent years, as Korea has upped the ante on its dependence on the rest of the world. In the first quarter of 2011, exports accounted for fully 50 percent of Korean GDP ― up dramatically from the pre-crisis share of 36 percent in 2007. If the world was in a typical recovery scenario, Korea would be in good shape to enjoy the tailwinds of a sustained sharp rebound in global trade. In such a classic recovery, the deeper the downturn, the more powerful the snapback and the greater the cumulative forces of self-sustaining revival. Moreover, the typical business cycle has a nat

Jul 17, 2011By Kim Jae-kyoung

Economy

Want to be a business leader? Be analytical!

By Marcus Von Engel In most Korean companies, technology has received the lion’s share of attention, with not enough attention to process and people. Let’s examine each in turn. High-performing companies make analysis an integral part of everyday business processes ― methods by which work gets done and value gets created. Developing a repeatable decision-making process that leverages data and analytical methods must be a high priority. Keep in mind that the power of analytics derives from making connections ― recognizing patterns in customer demand or business activities, isolating the drivers of performance, and anticipating the effects of decisions. To make connections, you have to look beyond the immediate task and appreciate what happens upstream and downstream. Having the right people focused on the right set of problems is one of the most important components of developing an effective analytical capability. High-performing firms typically have their analytics capabilities centrally managed by one accountable leader. Likely candidates for this role are the C

Jul 15, 2011By Kim Jae-kyoung

Economy

Kookmin aims for organic growth, not M&A

CEO Min seeks to minimize CEO risk to ensure business sustainability By Kim Jae-kyoung Growth prospects for Korea's banking industry have been less than optimistic due to rising household debt, economic uncertainties, narrowing interest margins and various other factors. This kind of shadowy situation is the most difficult time for CEOs to make strategic decisions on whether to pursue organic growth or quickly expand via merger and acquisitions (M&As). However, for Min Byong-deok, CEO of Kookmin Bank, it is not a difficult one. It is not because the nation’s largest lender by assets is in better shape than its rivals here, but because the chief executive is sure of where the bank stands. In the past, Kookmin experienced turbulent times as its loans extended to risky sectors turned sour en masse in the wake of the global financial crisis. Min believes that the lender was hit particularly hard by external shocks due to weakness in internal capabilities caused by poor risk management and mishandling of the workforce. In the eyes of Min, it is still too early for Kookmin t

Jul 15, 2011By Kim Jae-kyoung

In Person: Let’s learn from Kookmin CEO

Kim Jae-kyoung

Read more

South Korea joins gold rush

High volatility likely to persist in BRIC markets

What chief financial executives must know in investment

Hidden costs of entering emerging markets

Capital market overhaul

’Markets cannot exist without derivatives’

Change your approach in choosing MBA schools

Challenges in a tough global recovery

Want to be a business leader? Be analytical!

Kookmin aims for organic growth, not M&A

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