Korean Companies` Foreign DRs Fall to Lowest

Due to North Korea`s nuclear threat and SK Global`s fraudulent accounting methods, the prices of depositary receipts (DR) that Korean companies issued overseas continue to fall to new lows.

An Internet-based financial service company analyzed the price trend of Korean companies` deposit receipts for the past year. The results, shown on Wednesday, report that 10 items out of 17 fell to new lows this week, including those for SK Telecom.

SK Telecom, POSCO, Kookmin Bank, Cho-hung Bank, the Korea Fund, Hanaro Telecom saw the lowest closing price Tuesday on the New York Stock Exchange (NYSE) and Nasdaq.

The price of deposit receipts of Korea Electric Power Corporation (KEPCO), KT and Hyundai-Kia Motor also plunged to record-lows on Monday but inched up the following day. Thrunet`s DR closed at the same price on Monday and Tuesday.

Foreigners have been selling off a large amount of Korean stocks on the local stock market recently, experts say. Foreign investors net sold for the first time in five months on the stock market last month, and still continue to sell off shares this month.

“The sharp fall in the price of Korean companies` DRs is due to North Korea`s nuclear threat,” said Kim Han-jin at FIDES Investment and Management. “Along with this, SK Global`s fraudulent accounting practices frightened foreign investors who were already disgusted by Enron`s accounting malfeasance.”

“At a time when the base of the stock market is weak, rising DR prices and the local stock prices are likely to pull each other down, resulting in a vicious circle,” Kim said.

DRs are certificates issued when listed companies are to sell or distribute their stocks on foreign stock markets. Compared to loans from foreign financial institutions or foreign currency-denominated bonds, they do not impose the burden of interest.

Kwang-Am Cheon iam@donga.com