No. 4448 Thursday, August 21, 2014 TOP STORY TODAY S HEADLINES China money flocking to S. Korean stock market Regulator revises car insurance premium discount, extra charge system By Kim Gyu-sik, Bae Mi-jung Number of apartments to be put up for presale to hit 14 year-high S. Korea s foreign credit outweighs external debt in late June Hyundai Wia approves merger of Hyundai Wisco, Hyundai Metia GS E&C wins $767mn water treatment order from Brazil Google reshapes world in decade WKF 2014 to invite young stars Criminal complaint to be filed against big biz for undue benefits for affiliates Korea Investment & Securities to offer Japanese derivatives data in real time YG Entertainment to raise $59.7mn by selling new shares The criteria for giving extra charge to car insurance premiums will change from the size of accidents to the number of accidents from 2018. The criteria for granting discounts to premiums will also be modified from three years of accident-free driving to one year of such driving. The Financial Supervisory Service (FSS) said Wednesday it developed revision to the car insurance premium discount and extra charge system and will implement the revision from 2018 in a bid to incorporate changes in patterns of car accidents and improve fairness in premium payments. The current system, which was adopted in 1989, gives scores ranging from 0.5 to four, depending on the scale of accident, and gives extra charge of one grade per one point based on the scores. Car premiums are categorized on a scale of one to 26 grades, and when the extra charge worth one grade is given, the premium rises 6.8 percent on average. The key of the FSS revision is switching the basis for car insurance premium from the score system to the number of accidents. The new system gives extra premium charge worth three grades per one car accident, regardless of the size of accident. 1
A premium is determined based on records of one year prior to the time when the insurance policy was signed or renewed. This means car accidents that occur after October 2016 will be incorporated into calculating discounts or extra charge for premiums to be paid in 2018. Once the system based on the number of accidents kick-starts, premiums to be paid by drivers who cause no accident, or 79.6 percent of all drivers, will go down an average 2.6 percent, said Heo Chang-un, deputy governor of the FSS. In contrast, drivers who cause accidents of damages between 500,000 won ($489) and two million won, or 10.1 percent of all drivers, will be paying more premiums. China money flocking to S. Korean stock market By Yong Hwan-jin FINANCE In contrast, UK funds net-sold 4.6 trillion won during the same period. US investors made a net-buying of 2.4 trillion won, similar to that of Chinese counterparts. This indicates that US and Chinese funds are the most influential foreign funds in driving up the domestic stock market. Chinese investors have extended netbuying of Korean shares for eight straight months, including 1.8 trillion won netbuying in the last five months. They have sharply raised their net-buying in recent days. Chinese funds are gaining a larger share in the South Korean stock market. Their rapid growth has triggered the talks in the Yeouido-based brokerage sector that one needs to look to where Chinese funds are heading to in order to gain insight into what shares will rally in the domestic stock market. Once comprising a meager share, Chinese funds are increasingly grabbing a larger portion of the Korean stock market. Chinese investors net-bought Korean shares worth 1.88 trillion won ($1.85 billion) between January and July this year, said the Financial Supervisory Service. This means Chinese capital took up around 30 percent of the total foreign investors net-buying worth 6.37 trillion won. Foreign investors net-bought 347 billion won in the second half of last year, grabbing 2.4 percent of the total foreign investors net-buying worth 14.6 trillion won. As of late last month, Chinese capital worth 10.5 trillion won was invested in the domestic equity market. The capital accounted for a mere 2.3 percent of the total 460.3 trillion won foreign investors capital, but its share is expected to rise consistently. Number of apartments to be put up for pre-sale to hit 14 yearhigh By Lim Young-sin The number of apartments to be put up for pre-sale in the fall will be the largest in 14 years in South Korea. 95,392 household units of apartments will be put up for pre-sale across the country from September to November, said the real estate online portal Doctor Apartment 2
Wednesday. This is the highest since data on nationwide pre-sale of apartments began to be compiled in 2000, and up 21 percent year-on-year (yoy) from 78,861 of the same period a year ago. Source: Hoban Construction 37,009 household units of apartments will be put up for pre-sale in the Seoul metropolitan area, 17,647 in major cities and 40,736 in other regions. 34 reconstructed and redeveloped apartment complexes of 18,086 household units in total nationwide will become available for purchase. This is 7.8 times bigger than 2,294 units of last year. The second Daelim Acro River Park apartment in Banpo-dong, Seoul and that of Gyeonghuigung Xi apartment in Gyonam-dong are projected to be sold at the highest price. A slew of new apartments will be become available for purchase in large housing zones such as the Wirye New City, Dongtan-2 New City and Misa Gangbyeon New City. In regions other than the Seoul metropolitan area, mega-size builders with prominent brands will compete to sell apartments in the 2-2 section of Sejong city, so-called Gangnam of the city. In Busan, massive redeveloped apartment complexes housing over 1,000 households will enter the market. Builders are rushing to put up their apartments on pre-sale because housing purchase sentiment has recovered, as regulation on lending has loosened, while the government is expected to announce more property stimulus package following Chuseok, said Lim Chae-woo, real estate expert at KB Kookmin Bank. 3
ECONOMY S. Korea s foreign credit outweighs external debt in late June By Chun Jong-heon March to $647.8 billion, according to the Bank of Korea Wednesday. That of foreign debt rose $16.8 billion to $442.2 billion. External debt grew on increased foreign currency borrowings by banks. Of them, short-term external debts went up $eight billion to $131.8 billion while long-term external debts expanded $8.9 billion to $310.4 billion. This has put the nation s outstanding balance of net foreign credit at $205.6 billion, up $14.5 billion from late March. The figure marks the highest-ever in its history. South Korea s outstanding balance of foreign credit was $205.6 billion higher than its external debt as of late June, which hit a record high in its history. The nation s balance of overseas investment recorded 1.4 trillion won while outstanding foreign investments in Korea totaled $1.5 trillion won as of late June. This represents a $54.7 billion and $61.0 billion jump from late March, each. The nation s short-term external debt ratio edged up, slightly worsening debt sustainability. Korea s outstanding balance of foreign credit climbed $31.4 billion from late COMPANY Hyundai Wia approves merger of Hyundai Wisco, Hyundai Metia By Kim Dong-eun, Yoon Jae-un Source: Hyundai Wia Hyundai Wia said it held a meeting of board of directors Tuesday and endorsed merger of affiliates Hyundai Metia and Hyundai Wisco. This merger, which will enhance the capacity in metal materials and basic processing, which determines the quality of cars core parts such as engine and gearbox, is a strategic step with an ultimate goal to boost competitiveness of domestic carmakers such as Hyundai Motor and Kia Motors, said an official at Hyundai Wia. The merger raises the company s sales 13.1 percent to 3.8 trillion won ($3.7 billion) from 3.4 trillion won on a separate basis in 4
the first half and operating profit 8.6 percent to 262.8 billion won from 242 billion won. Hyundai Motor Group s share advanced overall Monday, and Hyundai Wia also gained 14,000 won, or 6.85 percent, to 218,500 won from the previous trading day. Under Hyundai Motor Group, Hyundai Wia is focusing on the production of finished powertrain, while Hyundai Metia is in charge of powertrain s basic materials and Hyundai Wisco power train processing. Meanwhile, as a result of this merger, Hyundai Motor Group s vice chairman Chung Eui-sun, who currently holds 347,241 shares, or 57.87 percent, of Hyundai Wisco, will own 1.95 percent stake in Hyundai Wia. So far, the vice chairman has not owned any stake in Hyundai Wia. GS E&C wins $767mn water treatment order from Brazil By Lee Ji-yong GS Inima Brasil, a 100 percent subsidiary of GS Inima Environment, has been established to oversee water treatment business in Brazil. The company independently carries out the design, investment, construction and operation of Brazil s water concession business. GS Inima Brasil won the order by forming a consortium with local construction companies STE and Enorsul. The share ratio of each company is GS Inima Brasil 60 percent, STE 35 percent and Enorsul 5 percent. GS Inima Brasil is contracted for $460 million (about 473.7 billion won). The project will involve integrated management of sewerage facilities in Maceio, in the state of Alagoas. Tasks will include the construction of new sewerage facilities, integrated operation of sewerage systems and collection of water and sewage fees. The contract allows GS E&C to operate the system for 30 years, including the construction period of four years. The project will add two new sewage treatment plants and two water ducts, making the total number of sewage treatment plants in the area three, which will be responsible for sewage treatment of 34,084 households. Google reshapes world in decade By Sohn Jae-gwon GS Engineering & Construction has won a water treatment project in Brazil valued at close to 800 billion won. GS E&C said Wednesday that GS Inima Environment, a subsidiary, won the order for an integrated sewerage management project placed by Casal, an Alagoas state company engaged in public water supply, sanitation and waste collection via its local operation, GS Inima Brasil. The order is valued at $767 million (about 788.2 billion won). Google celebrated its 10th year to go for initial public offering (IPO) on August 19 (local time). A decade ago, Google was just a searching engine whose major profit 5
came from advertisement searching. Going beyond the venture start-up, it transformed into the world s IT giant involved in almost all IT areas ranging from mobile, PC, cloud, wearable device and TV. Its market capitalization recorded 405 trillion won ($396.5) and annual sales 56.7 trillion won. Compared to a decade ago, its market capitalization jumped 14 times, sales 40 times and net profit 122 times. Its market capitalization came in at the world s 34th spot based on gross domestic production (GDP). The figure is higher than Denmark $324.2 billion and Malaysia $312.4. Google also outstrips Korea s leading conglomerates in market capitalization with Samsung Electronics 185.7 trillion won and Hyundai Motor 49.7 trillion won. Google is increasingly woven into our life with its Google TV, Google Car and Google Glass by setting its foot onto diverse fields. Meanwhile, it was embroiled in Big Brother issue with the ruling the right to be forgotten in Europe. Chung Ji-hoon, professor at Kyung Hee Cyber University, noted, the true meaning of Google is to convince youngsters with entrepreneurship to create venture startups and reshape the world, adding we need to pay attention to what changes will be brought by Google. Over 80 percent of smartphone users rely on Google s Android phone while over 700 million people use Google s web browser Chrome. MARKET US stocks extend gains By MK Staff US stocks advanced Tuesday after a betterthan-expected jump in July housing starts and upbeat earnings reports. The Commerce Department said construction on US new homes rose 15.7 percent in July to an annual rate of 1.09 million, well above forecasts. The Dow Jones Industrials gained 80.85 points, or 0.45 percent, to end at 16,919.59. The S&P 500 climbed 9.86 points, or 0.5 percent, to close at 1,981.60, only 0.3 percent off its July 24 record close at 1,987.98. The Nasdaq Composite added 19.20 points, or 0.43 percent, to finish at 4,527.51, the highest close since March 31, 2000. BGF Retail overvalued despite lackluster growth By Bang Young-duk HMC Securities said Wednesday that the share price of BGF Retail, operator of convenience store chains called CU, is high when considering its lackluster business growth. BGF Retail s corporate value has been overvalued when considering the deterioration of profitability amidst intense competition in the convenience store industry, said Park Jong-ryul, an analyst at HMC Securities. BGF Retail said Tuesday that its secondquarter sales came to 849.8 billion won ($833 million) and operating profit, 38.6 billion won. The figures represent a 7.0 6
percent and 4.6 percent increase, respectively, compared to the previous year. The better-than-expected second-quarter operating profit is due to the chain s solid profitability compared to competitors, Park said. Park projected, however, BGF s retail s third-quarter operating profit will increase just 3.4 percent sales and a 7.8 percent rise in sales. Expenses related to convenience store industry competition will serve as a variable, Park said. Provision of incentives to franchisees to prevent their withdrawal will inevitably lead to deterioration of profitability, he said. Korea Investment & Securities to offer Japanese derivatives data in real time By MK Staff Korea Investment & Securities said Wednesday that it has signed an agreement with Osaka Securities Exchange (OSE) to provide Japanese derivatives data to Korean customers in real time. OSE is part of the Japan Exchange Group, formed by the merger of Tokyo Stock Exchange and Osaka Securities Exchange in 2013, and specializes in derivatives trading. Products which can be traded through Korea Investment & Securities include Nikkei 225 (including Nikkei 225 mini), TOPIX Futures, 10-year JGB Futures and Nikkei 225 Options. We are now able to provide price information regarding the Japanese derivatives market, whose trading volume has sharply increased, via a formal contract with OSE, thus providing a stable and trustworthy trading environment to domestic customers, said Park Tae-hong, head of International Business Dept. at Korea Securities and Investment. Overseas futures trade accounts can be opened on the brokerage house website. The service can be accessed around the clock via home trading system dedicated to overseas futures and overnight futures or smartphone. YG Entertainment to raise $59.7mn by selling new shares Copyrightsc Yonhap News YG Entertainment said Wednesday it has decided to issue new shares worth 61 billion won ($59.7 million) to finance its working capital needs. The new shares will be sold to L Capital Asia 2 for 44,900 won apiece. The shares will be locked from trading for one year. The company said the proceeds will be used for its sustainable development and business diversification. Seoul shares end flat ahead of Fed minutes Copyrightsc Yonhap News South Korean stocks closed almost unchanged Wednesday as investors shunned risky assets ahead of the release of minutes from the US Federal Reserve s July meeting. The benchmark Korea Composite Stock Price Index (KOSPI) added 1.64 points, or 0.08 percent, to close at 2,072.78. The KOSDAQ edged down 0.12 percent to close at 561.96. Among large-cap stocks, Samsung Electronics gained 0.56 percent and SK Hynix soared 3.54 percent. Hyundai Motor added 0.67 percent and Kia Motors rose 0.5 percent. SK Innovation tumbled 6.26 percent and S- Oil sank 7.16 percent. 7
Meanwhile, the Korean currency ended at 1,022.7 won against the greenback, down 5.4 won from Tuesday s close. LSIS to export power equipment worth $13mn to Myanmar Copyrightsc Yonhap News South Korea s LSIS said Wednesday it has signed a high-voltage switchgear technology deal worth $13 million with Myanmar s biggest electric equipment maker AGE to provide more than 3,000 vacuum circuit breakers (VCBs) over the next five years. AGE will manufacture complete switchgears using VCB from LSIS by adding cables at its Myanmar plant and supply them in the local market. Lotte Chilsung s beverage sales are projected to grow an average of 9.7 percent annually from 695 billion won in 2013 to 1.10 trillion won in 2018, said Kim Yoonoh, an analyst at Shinyoung Securities. As beverage sales rise, the company s overall profitability is expected to increase from 2016. Kim also drew attention to the company's non-business momentum as well. Lotte Chilsung, which was incorporated into Lotte Group in its infancy, has stakes in heavy and chemical and service affiliates in line with the group s business diversification, he said. There have been frequent equity transactions between the affiliates recently, which raises the possibility that Lotte Chilsung could cash out some of its stakes in affiliates. LSIS will start the process this month by delivering 140 of 201 VCBs contracted for this year s supply. The company, however, plans to expand the items to cover the entire portfolio of electric power solutions, such as lock-out relay, busway and mold transformer. The Korean company said that it would also develop custom-tailored products through comprehensive technology partnership and respond promptly to changes in the local market. Lotte Chilsung target price raised By Bang Young-duk Shinyoung Securities Wednesday raised the target price of Lotte Chilsung Beverage, the liquor and beverage affiliate of the namesake retail giant, to 2.7 million won ($2,647) from 2.3 million won, saying it deserves to be readjusted in light of favorable consumer response to the company s new beer products and facility expansion plans. The brokerage house also maintained the "Buy" rating. 8
WKF 2014 to invite young stars By Chun Chung-hong GENERAL Mr Ben Casnocha, who will speak about personal affairs of start-ups, has been joining the Silicon Valley for 15 years at the age of 26. Mr Ben Casnocha is coauthor with the world s leading business social network service LinkedIn s CEO Reid Hoffman. The 15th World Knowledge Forum (WKF), which opens its 2nd chapter, will invite younger speakers than previous forums. Young leaders at the 15th WKF will offer participants chances to experience dynamics, which will propel the new era. The track titled Disruptive Innovation will be attended by young entrepreneurs who are actively working in Silicon Valley. This year s forum will arrange four startup sessions to reflect great interests in start-up ventures. The session will feature multi-phased discussions over how ideas can be turned into business model including investment attraction, operations, management, fund collection via listing and selling. The session will be arranged in a way to help those who seek to build start-ups. Eric Jackson, CEO of Caplinked and Ken Miller, CEO of Anchor Intelligence, will deliver lectures during operation and management sessions, both of whom worked at PayPal. They earned fame after having directed marketing operation and risk management teams, each. In the book titled, the PaPal Wars, Mr Jackson vividly told the story about what happened within the start-up. Not to mention venture sessions, other sessions also feature young speakers from diverse fields. Open Democracy journalist Ben Judah, 26, is highly valued for analyzing Russia and its President Bladmir Putin. Over the last three years until last year, Mr Judah covered Russia and Central Asia the European Council on Foreign Relations After working as correspondents at Reuter, AP, he now works for online media Open Democracy. Mr Ben Judah published Fragile Empire last year, which describes President Putin s power structure. Sarah Lewis, a Du Bois Fellow at Harvard University, will offer lecture during the track Beyond. Ms Lewis became wellknown after having presented at TED. Ms Lewis, who has studied creative process of artists, delivered persuasive and reverberating talks through artworks and artists lives that a new definition of creativity and success is needed. David Epstein, a reporter and author of the book titled The Sports Gene: Inside the Science of Extraordinary Athletic Performance who became renowned via his talks on the TED, will also attend the WKF. He received a spotlight after contradicting Malcolm Gladwell's 10,000 hour rule. Daniel Altman, 40, a professor at New York University s Stern School of Business, rose to prominence when he became the youngest-ever member of the Editorial Board of the New York Times at the age of 27 in 2001. He raised the importance of deep factor, which determines a long-term 9
future, in his book Outrageous Fortunes: The Twelve Surprising Trends That Will Reshape the Global Economy, a best-seller in South Korea. Criminal complaint to be filed against big biz for undue benefits for affiliates By Park Yoon-soo Starting later this month, big businesses caught providing firms in which their heads hold a stake with work or other undue privileges will be prosecuted, as will the heads themselves. The Fair Trade Commission also plans to quantify the wrongful acts carried out by big businesses. Once a company exceeds a certain level, the commission will file a criminal complaint with prosecutors against the company. The Fair Trade Commission said Wednesday that it plans to revise its guidelines related to reporting of violations of rules including the Monopoly Regulation and Fair Trade Act and enforce them from Thursday. The commission said that it will hand out law violation score to conglomerates with total amount of assets of more than 5 trillion won ($4.89 billion) if they offer undue profits to firms in which the founding family has stakes in according to the content and scope of advantages. The commission will file a complaint against companies whose scores exceed 2.5. According to the revision, 208 companies (listed companies in which the founding family ownership exceeds 30 percent, nonlisted companies in which the founding family ownership exceeds 20 percent) will be targeted for regulation as of the end of last year. Of the 208, there were 86 companies whose founding families ownership exceeded 80 percent. Press Release [Press Release] International Investment Position(End of June 2014) (Aug 20. 2014) [Source: The Bank of Korea] [Press Release] ROK and Japan to Hold a Consultation on Middle East Policy (Aug 19. 2014) [Source: Ministry of Foreign Affairs] For questions or comments, please contact 82-2-2000-2273 or e-mail englishnews@mk.co.kr Readers contributions of opinions and ideas are all welcome. Please post your name and contact information when submitting your contributions. 10