Korean Job Discussion Forums

[seosan08]

Koreans say crisis worse than 1997 as stocks tumble

http://www.tehrantimes.com/index_View.asp?code=181653

SEOUL (Bloomberg) -- Park Ji Eun�s dream of buying her first house in Seoul collapsed along with South Korea�s shares and currency.

�I�ve never seen the economy so bad,� said freelance scriptwriter Park, 32, whose pay from a radio music program was cut by 15 percent after the station suffered a drop in advertising. �I�ve worked on this program for eight years, and this is the first time I�ve ever had my pay cut.�

From writers to builders to chief executives, the won�s 26 percent slump and the Kospi stock index�s 40 percent plunge this year has revived memories of 1997, when the government was forced to turn to the International Monetary Fund for a $57 billion bailout. Only this time, they say it will be worse.

The central bank cut interest rates a record 75 basis points at an emergency meeting Oct. 27 to shore up an economy that last quarter grew at the slowest pace in four years.

Housewife Tae Hur, 55, has stopped dining out and shopping. Hur joined a stock-investing boom last year as the Kospi surged 33 percent to record highs, along with jumps in overseas markets. Now, she is watching her savings disappear with �a desperation like nothing I knew during the Asian crisis.�

The number of retail equity-investment accounts more than doubled to a record 17 million in 2007 from a year earlier, according to data from the Asset Management Association of Korea.

-------------- �Hard to bear�

�So many people piled into stocks late last year because they were feeling left out of the bonanza, with the Kospi hitting 2,000 and Chinese stocks gaining more than 100 percent,� said Park Hyun Chul, a fund analyst at Meritz Securities Co. in Seoul. �Most of them have never experienced a market like what we have now, so they find it hard to bear.�

The government on Sunday announced 14 trillion won (10.9 billion dollars) in extra spending and tax benefits for 2009 aimed at small businesses, low-income earners and the property market.

Son Yu Nam, who installs electrical systems in new homes and offices, said business is flagging and he is facing delays in payments for previous jobs as the economic downturn deepens.

�There was still a lot of building going on in the first half, but that�s drying up these days,� said the 41-year-old.

The backlog of unsold homes surged this year to the highest in more than a decade and defaults by Korean builders increased for the first time in five years.

Son said business was brisk during the 1997-1998 crisis as restaurants changed hands and people who lost jobs opened their own stores. �I�m not seeing that this time around.�

-------------------- 1997 Vs 2008

South Korean stocks fell 42 percent in 1997, while the currency plunged to 1,695 against the dollar, from 844.90. This year, the benchmark stock index has fallen as much as 51 percent and the won is the worst performing currency in Asia.

The economy expanded 0.6 percent in the third quarter, down from 0.8 percent in the previous three months, as consumer spending stagnated and exports fell by the most in seven years.

Ssangyong Motor Co., a South Korean unit of China�s largest automaker, said on Oct. 28 it may ask office workers to take leave to reduce costs after vehicle sales tumbled 23 percent in the first nine months of 2008.

Korea�s jobs growth moderated in September to the weakest pace in more than three years as manufacturers, builders and retailers cut employees.

And it�s not just workers facing fallout from the credit crisis sweeping the globe; chief executive officers from 18 Korean banks have taken a pay cut.

----------- �Share Koreans� pain�

Banks feel �deep responsibility for the current situation� and want to �share Koreans� pain,� the executives said in a statement Oct. 22.

Shinhan Financial Group Ltd., which runs South Korea�s third-largest bank, will slash its chief executive�s salary by 20 percent. Woori Finance Holdings Co., 73 percent owned by the government, said it will lower management pay by 10 percent, and Industrial Bank of Korea plans a 15 percent reduction.

As the global slump drives down exports, Korean consumers, saddled with record debt, are paring spending. Household debt was 153 percent of disposable income in the second quarter, according to UBS AG.

Spending at the nation�s biggest department stores fell 0.3 percent in September, the first decline this year, commerce ministry figures showed. Lotte Shopping Co.�s third-quarter profit tumbled 19 percent because of moderating sales.

------------------ �Bubble is bursting�

�Korea is the one economy in the region with a very large domestic credit bubble,� said Duncan Wooldridge, UBS�s chief Asia economist in Hong Kong. �There are signs that the bubble is bursting. The Korean economy should slow more rapidly in the quarters ahead.�

UBS forecasts the economy�s expansion will cool to 2.9 percent next year, the weakest pace since a contraction in 1998, as consumption growth slows by more than half.

A decline in the won, the second-worst performer of the world�s 16 most-traded currencies this year, is also creating headaches for Koreans.

It�s the main concern for laundry owner Teressa Chung, as it costs her more to send $1,000 every month to her two daughters studying in the U.S.

�I used to send 1 million won, but last time even 1.2 million won wouldn�t make 1,000 dollars,� said Chung, 54. �It�s so hard for me these days, no matter how much I pinch my pennies.�

[Ya-ta Boy]

I was here in 1997 and this is nothing like that. So far.

[Bigfeet]

"As the global slump drives down exports, Korean consumers, saddled with record debt, are paring spending. Household debt was 153 percent of disposable income in the second quarter, according to UBS AG."

This is what will really get them in trouble, no savings to fall back on to tide them over the bad times. This means the economy will contract hard. And the government don't have the freedom to borrow like there's no tomorrow like what the US does. No wonder the won is performing so badly.

[bacasper]

Does this mean privates will dry up?