Interest Abounds in IR Session on Korea in NY

“Do you think the Korean economy has hit bottom and started to recover?”

“Can Korea’s current account swing back to the black?”

“Are Korean banks healthy?”

“Do you recommend to foreign investors to invest in Korean companies?”

The Korean Strategy and Finance Ministry held an investment forum Monday for Wall Street investors at the Four Seasons Hotel in Manhattan, New York. Some 150 investors packed the conference room and asked about Korea’s economic outlook, export growth, the amount of bad assets in banks, and the prospects of ratification of the free trade deal between Korea and the United States.

With Korea’s economy showing recovery signs earlier than expected, foreign investors have shown heated interest in Korea.

Jeffrey Shafer, the vice chairman for global banking of CitiGroup who presided over the meeting, said, “Korea’s economy grew 0.1 percent in the first quarter of the year and the Korean government issued 30 billion dollars in currency stabilization bonds,” adding, “You will listen to a comprehensive explanation of Korea’s economy.”

Shafer introduced Korean Vice Strategy and Finance Minister Hur Kyung-wook, who said in a confident voice, “The Korean economy has almost reached bottom, so now is the right time to invest.”

“By posting quarter-on-quarter growth of 0.1 percent, Korea has become the first among major economies to see a rebound,” Hur said. “We cannot say the economy has hit bottom but it’s certain that it`s nearing bottom. Korea will take the lead in lifting the world out of the global economic crisis.”

Hur also spoke on the economic situation in Korea and the government’s policy efforts to overcome the economic crisis.

On external debts and foreign liquidity, two factors cited as negatives for the Korean economy, Hur said, “Foreign reserves started to grow this year, helping Korea become the world’s sixth-largest holder of foreign reserves. Of 380.5 billion dollars in foreign debts, 27 percent is deposits for ship exports and hedge debts that require no repayment.”

Afterwards, Fred Brettschneider, head of global markets for the Americas at Deutsche Bank, held a question and answer session. As if Hur’s explanation was not enough for them to decide whether to invest in Korea, foreign investors fired more questions at Hur.

One investor said, “On the ratification of the free trade deal between Korea and the United States, the Obama administration wants renegotiation for the sake of America’s auto industry. What are the prospects of ratification?”

Hur answered, “The deal struck a balance in many areas. Changing a provision needs review of the agreement`s whole content, which is out of the question.”

Certain investors asked about foreign liquidity and the soundness of Korean banks. One investor expressed doubt over the Korean government`s rosy forecast by saying, “You say Korea has ample foreign reserves and is likely to post a current account surplus. So what happens if global oil prices skyrocket?”

Another said, “I heard that the BIS capital-adequacy ratios of Korean banks is relatively high at 12.2 percent and the share of non-performing loans has significantly declined compared to the late 1990s, when the country was hit by the financial crisis. Doesn’t this indicate a possible rise in non-performing corporate debts with corporate performances aggravating due to the global recession?”

Other questions covered Seoul`s plan to receive funds from the International Monetary Fund by utilizing the fund’s Flexible Credit Line; foreign exchange policy in case of an increasing influx of dollars stemming from a current account surplus; and privatization of public companies.

Hur denied that Korea will accept funds from the IMF, and on foreign exchange policy, he said. “The Korean government is not implementing policies based on specific exchange rates.”

He also later told reporters, “The government doesn’t consider the Korean economy’s outlook to be only rosy. To persuade foreign investors, we struck an optimistic tone, however.”

higgledy@donga.com