From the category archives:

Korea

Korea: BOK Seems Set to Hold Policy Rate at 2% in 1H 2010

11 March 2010

BOK postpones decision on policy rate to next MPC meeting in April. By this decision, the policy rate stays at 2% for the 13th consecutive month. The decision was widely expected because of the slowdown suggested by some macro-data in January and because of the BOK’s tacit practice of not changing its policy stance at the end of a governor’s term of office. Thus, Governor Lee leaves rate hikes in the in-tray for the new governor, who will take office in April.

Korea: Narrowing Trade Surplus Reflects Economic Recovery

11 March 2010

Trade balances (deficit of USD461m in January and surplus of USD2.3bn in February) were still smaller than the monthly average of USD3.4bn. As the trade surplus shrank, there were worries about an economic slowdown based on the previous experience back in 2009. At that time, net exports, i.e. the trade surplus, contributed significantly to economic growth. However, this year is different from last year in two ways. The first is that exports are not expected to decrease as they did in 2009 but will likely increase. Furthermore, the pace of recovery in domestic demand is expected to be maintained and lead to an increase in import demand. As the Korean economy is expected to grow faster than the global economy, growth in imports should exceed that of exports, leading to a fall in the trade surplus.

Korea Equity: Takeaways from Korea Investor Conference, March 4-5

9 March 2010

Company positives: SFG NIM to continue to expand in 1Q10 by 10bp vs. CIR’s flat forecast. Buy POSCO on low flat steel inventory; higher conviction on domestic price hikes, and rising export prices. Hankook Tire is more upbeat on its ASP guidance and main competitor is weakening. Buy STX Pan Ocean on better BDI outlook and diminishing financial concerns. Buy Lotte Shopping on robust discretionary spending outlook. Buy SEMCO on positive upside risk in MLCC. Buy NHN on strong online ad rebound in 2010 and launch of highly anticipated MMORPG TERA this summer. Buy Techwin for better-than-expected synergies from CCTV integration with SEC. Shipbuilders indicated positive surprises are likely with a strong rebound in new orders for 2H10E and potential new regulation on CO2 regulations. Company negatives: LGE handset OPM should remain at a depressed level driven by legacy model mix in near term. Korea Life’s IPO price is lower than expectations in terms of P/EV (at below 1x) indicating upside cap to SFM. See downside earnings risk on KT&G due to weaker export earnings and volumes.

Korea: Slow Down of Leading Index Might Be Temporary

3 March 2010

Jan YoY Industrial production rose to 36.9%; Main export sectors again boosted industrial production; Service production and consumer goods sales continued to grow in YoY basis; YoY construction orders also increased by strong rebound in private sectors; We forecast composite leading index rebound soon

Korean Banks: Revisiting the Most Feasible M&A Scenarios

3 March 2010

We have been positive on the Korean banks for three reasons: 1) Key earnings drivers (NIM and credit cost) on a favorable cycle and more upside risk than downside in FY10E earnings, 2) potential market consolidation, and 3) attractive valuations (0.9x 2010E P/BV) standing at the low end of their mid-cycle valuation range (0.9x~1.1x). In particular, M&A looks to be a key catalyst among the three.

Korean Auto Manufacturers: First Read on Feb-10 Auto Sales

2 March 2010

HMC: Global shipment came in at 251K units in Feb-10 (+23% Y-Y and -8% M-M); KIA: KIA reported global shipment at 138K units in Feb-10 (+46% Y-Y and -15% M-M); We reiterate our bullish calls on HMC (1M, TP: W160,000) and KIA (1M, TP: W28,000), while we prefer OEMs to parts manufacturers on greater leverage to auto demand.

Korea: Feb Trade Balance Turns into a Surplus and CPI Inflation Slows

2 March 2010

Though there were concerns of a possible trade deficit in February for a second consecutive month, the trade account instead turned into a surplus of USD2.3bn, from a deficit of USD0.5bn in Jan. Significantly stronger exports (to USD33.3bn from USD31.0bn) and moderating imports (to USD30.9bn from USD31.5bn) resulted from big gains in MoM shipbuilding exports (to USD4.9bn from USD1.9bn) and decrease in MoM crude oil imports (to USD5.1bn from USD5.8bn). Both exports and imports in February recorded double-digit YoY growth, but growth of imports (36.9%) outpaced exports (31.0%).

Korean Consumers: Robust Upswing in Discretionary Spending

21 February 2010

While the macro outlook and stock market offer conflicting signals, we take a bullish stance on discretionary spending; Discretionary spending growth appears to be in line with our nominal consumption growth forecast of 6% in 1H but exceed 4.4% in 2H with a deflator of 1.3% and 2.5%.

Korean Banks: 2009 Wrap-Up and 2010 Outlook

20 February 2010

Major Points: 4Q09 mixed with solid core earnings but shrinking bottom-lines; FY10E NIM to rise 27bps YoY, if 4Q09 level maintained; More upside surprise in FY10E credit costs; Standing at the low-end of historical valuation range of 0.9x ~ 1.1x P/BV

Korea: KRW May Not Be As Strong As Originally Expected

18 February 2010

Major Points: Recent volatility in USD/KRW reveals vulnerability of KRW to external shocks; Strengthening FX market environment has limitations on stabilizing market; Remaining sensitivity of risk aversion leads to a weaker KRW; Economic recovery/delay of BOK policy rate hikes also causes a weaker KRW; We now forecast annual average USD/KRW to rise 1,100 (previous 1,074)

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