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Foreign Direct Investment In February Jumps 75 Percent
(Korea Herald)(2002-03-07)
Foreign direct investment (FDI) shot up by 75 percent in February year-on-year,
signaling that foreign investors' confidence in the Korean market is recovering, the
Ministry of Commerce, Industry and Energy said yesterday.
According to the ministry, total FDI last month came to $576 million, a 75.1 percent
rise from the same month last year, which drew $329 million.
"This is four months in a row that Korea saw year-on-year expansion of FDI, after
October (-24.6 percent)," a ministry official said. The growth figure for November
was 6.9 percent, December 9.0 percent and January 52.8 percent.
The accumulated figure for January and February is $1.29 billion, up 62.5 percent
from the two month total last year.
Major projects in January included Samsung TESCO and Hutchinson's stock
purchases and an AIDS vaccine company's new investment.
"A notable point during the first two months of this year are that investments from the
United States took up 57.2 percent, followed by the European Union with 22.6
percent and Japan with 10.7 percent," the official said, adding that investments from
the United States shot up by 107 percent and European Union 102 percent.
By industry, investments in the manufacturing sector rose to 41.9 percent from the
18.2 percent of the same period last year, which translates to an increase of 275
percent when the volume is calculated.
The service sector's share fell from 81.7 percent to 58.1 percent, but rose a slight 15.6
percent in volume, the ministry also added.
In investment size, the share of the investments $10 million or larger rose from 74.6
percent last year to 87.9 percent this year, and the share of those that are worth less
than $5 million inched down from 95.8 percent to 94.4 percent.
New investments made up 88.1 percent of total investments.
"This continuing growth shows that investors are expecting economic recovery and
that they hold positive views of Korea's investment environment," the ministry said.
Spread On Korean Overseas Bonds Falls To Record Low
(Korea Herald)(2002-03-07)
The spread on subordinated bonds issued overseas by Korean banks has fallen to a
record low this year, as foreign investors bet that local banks' financial health will
improve further as economic recovery unfolds, the Korea Center for International
Finance (KCIF) said yesterday.
The possible upgrade of Korea's sovereign credit rating also contributed to lowering
spreads, the institute said.
Since late last year, the spreads on Korean bonds have continued to fall, as foreign
investors scrambled to purchase them on hopes that local banks would rake in
substantial gains this year amid a strong economic recovery.
The Korean economy is expected to see robust growth this year, in the face of global
economic downturn. On the back of low interest rates and huge exposure to consumer
loans, 22 local banks earned a combined net profit of 5.2 trillion won last year.
According to the institute, subordinated bonds issued by Korea Exchange Bank fell by
0.34 percentage point to 4.52 percent last Friday from two weeks ago, and was also
2.28 percentage points down from the beginning of the year.
Spreads on Chohung Bank's subordinated bonds also fell 1.95 percentage points to
3.45 percent, with Hanvit Bank's falling 1.8 percentage points to 3.46 percent during
the same period.
Analysts from Moody's Investors Service visited Seoul last week for a credit rating
review. They hinted that Korea's sovereign rating may be upgraded in two months.
Another global rating agency, Fitch Ratings, is also scheduled to arrive in Seoul later
this month for the same purpose.
The government's bank privatization plan, set to commence this month, also makes
subordinated bonds issued by Korean banks more attractive, the KCIF said.
Against this backdrop, local banks are keen to raise foreign capital by issuing bonds
with warrants and convertible bonds.
For one, Chohung Bank plans to issue depositary receipts totaling $500 million
following an issue of identical proportions last November.
KorAm Bank, one of the healthiest banks in Korea, said yesterday it plans to issue
DRs worth $200 million in May.