With Moon Jae-In’s victory in South Korea, the period of tension on the Korean Peninsula is likely to end. With the rise to power of the new president, South Korea can expect a sharp decline in hostilities with North Korea as well as a resumption of dialogue with China. An expected and highly anticipated victory was confirmed in South Korea on May 9, with candidate Moon winning South Korea’s presidential race over his rivals Hong Joon-pyo (Liberty Korea Party) and Ahn Cheol-soo (People’s Party). After the resignation and arrest of former President Park Geun-hye over an immense corruption scandal, public opinion turned away from her party in favour of the main opposition representative, a center-left lawyer specializing in humanitarian issues. Moon spent several years in the opposition party advocating for greater cooperation in the region and dialogue with Pyongyang as well as with Beijing, representing quite a contrast to Guen-Hye’s pro-Americanism. Along the lines of Duterte in the Philippines, Moon intends to resume dialogue with all partners in order not to limit his options in the international arena. Such an approach reflects the essence of the multipolar world order: cooperation and dialogue with all partners in order to achieve a win-win outcome. Looking at the situation in the region, the victory of a politician who seems to have every intention of negotiating an agreement rather than supporting military escalation seems to provide for a hopeful future for China and her neighbors. The level of cooperation and trade between South Korea and China is fundamental to the economy of both countries, so a return to the negotiating table over the issues surrounding the deployment of THAAD are a hopeful sign that the business communities of China and South Korea value deeply.
This post was published at Zero Hedge on May 15, 2017.
After being formally impeached just three weeks ago, former South Korea President Park Geun-hye was arrested on Friday in connection with a corruption scandal that led to her removal from office, Yonhap reports.
This post was published at Zero Hedge on Mar 30, 2017.
A South Korean court removed the president on Friday, a first in the nation’s history, rattling the delicate balance of relationships across Asia at a particularly tense time. Her removal capped months of turmoil, as hundreds of thousands of South Koreans took to the streets, week after week, to protest a sprawling corruption scandal that shook the top echelons of business and government. Park Geun-hye, the nation’s first female president and the daughter of the Cold War military dictator Park Chung-hee, had been an icon of the conservative establishment that joined Washington in pressing for a hard line against North Korea’s nuclear provocations. Now, her downfall is expected to shift South Korean politics to the opposition, whose leaders want more engagement with North Korea and are wary of a major confrontation in the region. They say they will re-examine the country’s joint strategy on North Korea with the United States and defuse tensions with China, which has sounded alarms about the growing American military footprint in Asia.
As discussed last night, in a historic ruling, the South Korean Constitutional Court upheld an impeachment decision against President Park Geun-hye, removing her from office on Friday over a graft scandal involving the country’s conglomerates at a time of rising tensions with North Korea and China. The ruling sparked protests from hundreds of her supporters, two of whom were killed in clashes with police outside the court. Park becomes South Korea’s first democratically elected leader to be forced from office, capping months of paralysis and turmoil over a corruption scandal that also landed the head of the Samsung conglomerate in jail. A snap presidential election will be held within 60 days. Her ouster caps a 5 month-long political scandal, whose verdict exposed fault lines in a country long divided by Cold War politics. The ruling to uphold parliament’s Dec. 9 vote to impeach her marks a dramatic fall from grace of South Korea’s first woman president and daughter of Cold War military dictator Park Chung-hee, both of whose parents were assassinated. While Park’s conservative supporters clashed with police outside the court, elsewhere, most people welcomed her ouster. A recent poll showed more than 70 percent supported her impeachment. Hundreds of thousands of people have for months been gathering at peaceful rallies in Seoul every weekend to call for her to step down.
This post was published at Zero Hedge on Mar 10, 2017.
South Korea political crisis spilled over into the corporate sector overnight, when the country’s special prosecutor on Monday sought a warrant to arrest the head of Samsung Group, the country’s largest conglomerate, accusing him of paying multi-million dollar bribes to a friend of impeached President Park Geun-hye. *** According to Reuters, investigators had grilled the head of Samsung, the world’s biggest maker of smartphones, flat-screen TVs and memory chips, Jay Y. Lee for 22 straight hours last week as a suspect in a corruption scandal, which last month led to parliament impeaching president Park. The special prosecutor’s office accused Lee of paying bribes total 43 billion won ($36.42 million) to organizations linked to Choi Soon-sil, a friend of the president who is at the center of the scandal, in order to secure the 2015 merger of two affiliates and cement his control of the family business. The 48-year-old Lee, who became the de facto head of the Samsung Group after his father, Lee Kun-hee, was incapacitated by a heart attack in 2014, was also accused of embezzlement and perjury, according to the prosecution’s application for an arrest warrant.
This post was published at Zero Hedge on Jan 16, 2017.
When former Chinese Politburo member Zhou Yongkang was arrested in 2014 on corruption charges, the scale of his ill-gotten gains was astounding, totalling some $16 billion. When sums that large are involved, most of the assets have to be invested in financial instruments and real estate. But the list of physical currency found in his homes is revealing: 152.7 million Chinese yuan (valued at the time at $24.5 million), 662,000…10,000…55,000 Swiss francs — and US$275 million. The former head of China’s internal security services and one of the 10 most powerful men in China apparently preferred to keep his “petty cash” mainly in U.S. dollars. He’s not alone. China lost around $1 trillion to capital flight in 2015, before clamping down hard at the beginning of 2016. Much of this money leaves China via fake invoicing in Hong Kong, where the local currency is pegged to the U.S. dollar. Illicit outflows are also facilitated by casinos in the Philippines, South Korea, and on remote Pacific islands, all of which operate primarily in dollars. Predictions of the dollar’s demise and eventual replacement by the Chinese yuan, are a staple of global economic punditry, but they have little basis in reality. Of course China has become an important component of the global economy, accounting for more than 15 percent of global gross domestic product. But when Chinese people themselves prefer to hold dollars, there is little chance that the Chinese yuan will ever replace the U.S. dollar as the world’s key currency.
Overnight, political turmoil migrated to Asia after South Korean lawmakers voted 234-56 to impeach President Park Geun-hye over accusations of bribery, abuse of power and violating her constitutional duties, setting the stage for her to become the country’s first elected leader to be expelled from office in disgrace. *** The impeachment motion was carried by a wider-than-expected margin in a secret ballot in parliament, meaning more than 60 of Park’s own conservative Saenuri Party members backed removing her. The votes of least 200 members of the 300-seat chamber were needed for the motion to pass. The Constitutional Court must now decide whether to uphold the motion, a process that could take up to 180 days. “I solemnly accept the voice of the parliament and the people and sincerely hope this confusion is soundly resolved,” Park said at a meeting with her cabinet, adding that she would comply with the court’s proceedings as well as an investigation by a special prosecutor.
This post was published at Zero Hedge on Dec 9, 2016.
The fall of South Korea’s biggest container line Hanjin Shipping Co. is similar to the 2008 collapse of Lehman Brothers Holdings Inc. and has materially impacted the shipping industry, Seaspan Corp. Chief Executive Officer Gerry Wang said. Seaspan, the Hong Kong-based container-ship leasing company that has three vessels chartered to the distressed line, is evaluating all options and examining systemic risks resulting from Hanjin’s bankruptcy filing, Wang said in an interview with Bloomberg Television. In June, Wang had rejected Hanjin’s requests for charter-rate cuts before the shipping line filed for court receivership last month. ‘The fallout of Hanjin Shipping is like Lehman Brothers to the financial markets,’ Wang said. ‘It’s a huge, huge nuclear bomb. It shakes up the supply chain, the cornerstone of globalization.’
…….. As the stock market reached its lunatic peak near 2200 in August, the certainty that the Fed is out of dry powder and that the so-called economic recovery is out of runway gave rise to one more desperate pulse of hopium. Namely, that the central banks of the world were about to embark on outright ‘helicopter money’, thereby jolting back to life domestic economies that are sliding into deflation and recession virtually everywhere – – from Japan to South Korea, China, Italy, France, England, Brazil, Canada and most places in-between. That latter area especially includes the United States. Despite Wall Street’s hoary tale that the domestic economy has ‘decoupled’ from the rest of the world, the evidence that the so-called recovery is grinding to a halt is overwhelming. After all, the real GDP growth rate during the year ending in June was a miniscule 1.2%. It reflected the weakest 4-quarter rate since the Great Recession. And even that was made possible only by an unsustainable build-up in business inventories and the shortchanging of inflation by the Washington statistical mills. Had even a semi-honest GDP deflator been used, the US economy would have posted real GDP on the zero-line, at best.
Corporate earnings are heading for a fifth straight quarter of declines, dragged down mostly by energy companies’ struggles with low oil prices and a tepid global economy that threatens to throttle sales growth in many industries. U. S. companies as varied as hamburger chain McDonald’s Corp. and Honeywell International Inc., a maker of gas-processing equipment and cockpit controls, have slashed costs and bought back shares to help earnings. Amid a worldwide sales slog, European pay-TV operator Sky Plc and South Korea’s Hyundai Heavy Industries Co. are crimping expenses to boost profit. John Carey, a Boston-based fund manager at Pioneer Investment Management Inc., calls it earnings engineering, and he’s seen it before. Companies have grappled with a lackluster economy for several years as the U. S. manufacturing recovery sputtered, the world economy slowed and oil prices fell to $50 a barrel from more than $100 in 2014. ‘There hasn’t been a lot of what you might call real, honest earnings growth through sales and business improvement and expansion of operations,’ said Carey, whose firm oversees about $240 billion of equities and fixed income worldwide. ‘They just keep digging deeper into the hat and finding hidden rabbits and new ways to generate earnings.’
The dollar’s three-week rally is just the beginning, according to Deutsche Bank AG. A slump by the greenback earlier this year has ‘likely run its course,’ analysts at the world’s second-largest currency trader wrote in a note Friday. The bank favors buying the U. S. currency versus emerging markets – such as China, Mexico and South Korea – following a shakeout in speculative bets on the dollar, George Saravelos, co-head of global foreign-exchange research in London, wrote. With policy makers from the Group-of-Seven economies meeting in Japan, the Federal Reserve this week gave the dollar a boost by signaling that it may raise interest rates as soon as June. That helped send the greenback to a seven-week high, providing relief to policy makers outside the U. S. who have watched with dismay as a weaker dollar eroded the stimulatory effect of interest-rate cuts and bond purchases. ‘The dollar still has some legs,’ said Sebastien Galy, a strategist at Deutsche Bank in New York. ‘The global dollar trend is probably far less appealing than it used to be, but there’s still some opportunity there.’ The Bloomberg Dollar Spot Index, which tracks the dollar versus 10 peers, added 0.8 percent this week. The greenback rose 0.8 percent to $1.1224 per euro and gained 1.4 percent to 110.15 yen.
The South Korean government’s push to restructure debt-laden companies is set to cost tens of thousands of workers their jobs in an economy where social security is limited and a rigid labor market reduces the likelihood of getting rehired in a full-time position. Many of the layoffs will be in industrial hubs along the southeast coastline, where shipyards and ports dominate the landscape. These heavy industries, which helped propel South Korea’s growth in previous decades, have seen losses amid a slowdown in global growth, overcapacity and rising competition from China. As a condition of financial support, creditor banks and the government are pushing companies to cut back on staff and sell unprofitable assets. In Korea, losing a permanent, full-time job often means sliding toward poverty, one reason why labor unions stage strikes that at times lead to violent confrontations with employers and police. A preference for hiring and training young employees, rather than recruiting experienced hands, means that many workers who get laid off drift into day labor or low-wage, temporary contracts that lack insurance and pension benefits, according to Lee Jun Hyup, a research fellow for Hyundai Research Institute. ‘The possibility of me getting a new job that offers similar income and benefits is about 1 percent,’ said one of about 2,600 employees to be laid off following a previous restructure, of Ssangyong Motor in 2009. The 45-year-old worker, who asked only to be identified by the surname Kim as he tries to get rehired, initially delivered newspapers and worked construction after losing his permanent job. He’s now on a temporary contract at a retailer and taking night shifts as a driver to get by. Despite having these two jobs, his income has been halved. Being fired was ‘like being pushed into a desert with no water,’ Kim said.
South Korea’s exports tumbled to $41 billion in April, marking the 16th consecutive month of declining foreign sales. Last month’s result represented a 11.2% decline from prior year, and an 18% drop from April 2014. Moreover, within that shrinking total, exports to China were down by 18.4% last month, following a 12.2% drop in March. The Korean export slump is no aberration. The same pattern is evident in the entire East Asia export belt. That’s because the Red Ponzi is in its last innings. Beijing is furiously pumping on the credit accelerator, but to no avail. As can’t be emphasized enough, printing GDP by means of wanton credit expansion does not create wealth or growth; it just results in an eventual day of reckoning when the speculative excesses inherent in central bank money printing collapse in upon themselves. China is surely close to that kind of implosion. During Q1 total credit, or what Beijing is please to call ‘social financing’, expanded at a $4 trillion annualized rate. This was up 57% over prior year and represented debt growth at a 38% of GDP annual rate.
This week, SU-24 fighter-bombers buzzed a U. S. destroyer in the Baltic Sea. The Russian planes carried no missiles or bombs. Message: What are you Americans doing here? In the South China Sea, U. S. planes overfly, and U. S. warships sail inside, the territorial limits of islets claimed by Beijing. In South Korea, U. S. forces conduct annual military exercises as warnings to a North Korea that is testing nuclear warheads and long-range missiles that can reach the United States. U. S. warships based in Bahrain confront Iranian subs and missile boats in the Gulf. In January, a U. S. Navy skiff ran aground on an Iranian island. Iran let the 10 U. S. sailors go within 24 hours. But bellicose demands for U. S. retaliation had already begun. Yet, in each of these regions, it is not U. S. vital interests that are threatened, but the interests of allies who will not man up to their own defense duties, preferring to lay them off on Uncle Sam. And America is beginning to buckle under the weight of its global obligations.
On the campaign trail, Donald Trump’s foreign policy smacks of bluster and bellicosity. He is, as he often says, ready to ‘knock the hell out of ISIS.’ But that kind of rhetoric appears to mask a far different philosophy, that of an inward-looking politician whose views represent a dramatic break with years of Republican Party orthodoxy. From the Middle East to Europe to Asia, Trump’s instincts appear shaped by his belief that too much has been asked of the United States and that it’s time for other nations to shoulder a far bigger share of the financial and other burdens of dealing with a world of dangerous terrorists and aggressive states such as Russia and China. Trump met Monday morning with members of The Washington Post’s editorial board. An audio recording of the hour-long interview was shared with reporters and editors in the newsroom. In perhaps the most extensive questioning he has faced on foreign policy issues, the Republican front-runner sounded more isolationist than interventionist, more interested in rebuilding the United States than nation-building overseas. ‘I don’t think we should be doing nation-building anymore,’ he said when he was asked about the values and policies of previous presidents such as Ronald Reagan. ‘I think it’s proven not to work. .’.’. I just think we have to rebuild our country. .’.’. There are values in our country that we have to promote. We have a country that’s in bad shape.’ He fretted that the United States is spending billions and billions of dollars to support countries such as Germany, Saudi Arabia, Japan and South Korea. ‘We spent billions of dollars on Saudi Arabia and they have nothing but money, and I say, ‘Why?”’ Trump said. ‘I would structure a much different deal with them, and it would be a much better deal.’
South Korean exports shrank by one-sixth for the first 20 days of this month from a year earlier despite longer working days, data showed on Sunday, adding to concerns that the global economy was losing momentum. South Korean exports during the Feb. 1-20 period totaled $22.16 billion, down 17.3 percent from the comparable period of 2015, while imports fell 17.4 percent to $20.19 billion, according to the data from the Korea Customs Service. Adjusting for the longer working days that the country had this year than last year, exports and imports during the first 20 days of this month would be about 20 percent each less than a year earlier, Thomson Reuters calculations show.
Hong Kong dollar forwards sank to their weakest level this century, interbank loan rates jumped the most in seven years and the Hang Seng Index tumbled as China’s market turmoil fueled speculation the city’s 32-year-old currency peg will end. Contracts to buy the currency in 12 months fell as much as 0.5 percent to HK$7.9056 versus the greenback, beyond the HK$7.75-HK$7.85 range that it can trade within under the existing exchange-rate system. The Hong Kong dollar spot rate dropped as low as HK$7.8243, within 0.33 percent of the weak end of its band, and a benchmark rate for three-month loans rose eight basis points to 0.55 percent. The city’s government bonds tumbled, pushing the 10-year yield to the highest level in 15 months and Hong Kong’s Hang Seng Index of shares dropped the most since Aug. 24 and as rising local borrowing costs threaten to further brake an economy reeling from a collapse in Chinese shares and the slowest growth in the mainland in 25 years. The yuan’s slide to a five-year low in the first week of January triggered weakness in emerging Asian currencies this month, led by a 3.4 percent drop in South Korea’s won.
South Korea’s property market is heading south, adding a pain point to an economy already weakened by a yearlong export slumpamid more modest growth in China, its biggest trading partner. Seoul apartment sales dropped 40 percent in December to 8,614 from an eight-year-plus high reached in April, data from the Ministry of Land, Infrastructure and Transport show. While record-low interest rates support the prices, tightening mortgage rules and expectations for higher rates are cooling demand after months of a property boom last year. ‘The property market is losing steam,’ said Kim Seong Hoon, an economist at Korea Economic Research Institute. ‘Timing-wise, it’s putting extra pressure on other parts of the economy as it’s hard to expect a major recovery from exports with China’s slowdown.’ The property market is returning to a weak spell last seen in 2009-2013, which economists say won’t help Asia’s fourth-largest economy achieve its 3.1 percent growth target. President Park Geun Hye’s administration has been pinning hopes on domestic demand to shore up growth as continued market troubles in China and rising interest rates in the U. S. cloud the outlook for exports.
South Korea’s factory output missed estimates in November as poor exports due to weak global demand continue to weigh on production in Asia’s fourth-largest economy. Industrial production fell 0.3 percent from a year earlier, Statistics Korea said. Output fell 2.1 percent from October, the most since January this year. Exports declined in the first 11 months of this year and that trend is expected to continue, with an almost 12 percent drop forecast for this month.
South Korea’s exports slumped for a 12th straight month as a weak global outlook and softer demand from China hurt overseas shipments. Trade ministry data released Friday show exports fell 13.8 percent in December from a year earlier. Economists surveyed by Bloomberg projected an 11.7 percent decline. Imports dropped 19.2 percent in December and the trade surplus stood at $7.2 billion.