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from Global Investing:

Amid yen weakness, some Asian winners

Asian equity markets tend to be casualties of weak yen. That has generally been the case this time too, especially for South Korea.

Data from our cousins at Lipper offers some evidence to ponder, with net outflows from Korean equity funds at close to $700 million in the first three months of the year. That's the equivalent of about 4 percent of the total assets held by those funds. The picture was more stark for Taiwan funds, for whom a similar net outflow equated to almost 10 percent of total AuM. Look more broadly though and the picture blurs; Asia ex-Japan equity funds have seen net inflows of more than $3 billion in the first three months of the year, according to Lipper data.

Analysts polled by Reuters see more drops ahead for the yen which they predict will trade around 102 per dollar by year-end (it was at 77.4 last September). Some banks such as Societe Generale expect a 110 exchange rate and therefore recommend being short on Chinese, Korean and Taiwanese equities.

But the weak yen may not be unilaterally bad news for Asian companies. Morgan Stanley analysts have compiled a list of Asian shares that could gain from falling yen costs. Take India's Maruti-Suzuki. It has zero exposure to yen in terms of revenue but its cost exposure (due to import or components) is 34 percent. A similar picture at China Motor Corp. in Taiwan. Another Taiwanese firm, semiconductor maker Siliconware Precision has a 2 percent revenue exposure to Japan but the yen accounts for 15 percent of its cost base, according to MS data.

from Global Investing:

Hyundai hits a roadbump

The issue of the falling yen is focusing many minds these days, nowhere more than in South Korea where exporters of goods such as cars and electronics often compete closely with their Japanese counterparts. These companies got a powerful reminder today of the danger in which they stand -- quarterly profits from Hyundai fell sharply in the last quarter of 2012.  (See here to read what we wrote about this topic last week)

Korea's won currency has been strong against the dollar too, gaining 8 percent to the greenback last year. In the meantime the yen fell 16 percent against the dollar in 2012 and is expected to weaken further. Analysts at Morgan Stanley pointed out in a recent note that since June 2012, Korean stocks have underperformed Japan, corresponding to the yen's 22 percent depreciation in this period. Their graphic below shows that the biggest underperformers were consumer discretionary stocks (a category which includes auto and electronics manufacturers). Incidentally, Hyundai along with Samsung, makes up a fifth of the Seoul market's capitalisation.

from Global Investing:

Korean exporters’ yen nightmare (corrected)

(corrects name of hedge fund in para 3 to Symphony Financial Partners)

Any doubt about the importance of a weaker yen in thawing the frozen Japanese economy will have been dispelled by the Nikkei's surge to 32-month highs this week. Since early December, when it became clear an incoming Shinzo Abe administration would do its best to weaken the yen, the equity index has surged as the yen has fallen.

Those moves are giving sleepless nights to Japan's neighbours who are watching their own currencies appreciate versus the yen. South Korean companies, in particular, from auto to electronics manufacturers, must be especially worried. They had a fine time in recent years  as the yen's strength since 2008 allowed them to gain market share overseas. But since mid-2012, the won has appreciated 22 percent versus the yen.  In this period, MSCI Korea has lagged the performance of MSCI Japan by 20 percent. Check out the following graphic from my colleague Vincent Flasseur (@ReutersFlasseur)

from Financial Regulatory Forum:

S.Korea restricts trading in FX forwards

   By Seo Eun-kyung and Cheon Jong-woo
   SEOUL, Nov 19 (Reuters) - South Korea announced measures on Thursday aimed at tightening control over foreign exchange liquidity to make the banking system less vulnerable to the capital flight seen during the financial crisis.
   The Financial Services Commission, a financial watchdog, said the measures would enhance the soundness of banks' foreign currency assets in Asia's fourth-largest economy that is heavily reliant on exports.
   But the regulator said the country would not try to directly control foreign currency liquidity conditions at foreign bank branches in the country, although the branches would be subject to new regulations on forward deals.
   Authorities appear to be looking at ways to avoid a repeat of the capital flight that occurred during the global financial crisis, partly triggered by worries about the ability of companies to roll over their foreign debt liabilities during the global credit crunch.
   One measure called on banks to hold at least 2 percent of their total foreign assets in foreign treasury bonds rated A or above, or set aside a certain amount of safe foreign assets, such as treasuries, in proportion to the value of liabilities maturing within a year.
   The measure will not apply to foreign bank branches in the country. However, restrictions were placed on both local banks and foreign bank branches in trading foreign exchange in forward markets.
   "Exporters' excessive FX hedging boosted short-term foreign currency debts worsening the credit crisis last year. As the economy heavily relies on external factors, we may face the same situation if we experience another crisis," said Jeong My-young, a currency strategist at Samsung Futures.
   "The authorities are showing their determination to minimise the potential impact from hedging practices," she added.
   The steps are expected to weaken bets for a firmer won <KRW=> as exporters will be less aggressive in buying the local currency, traders said.
   A large chunk of foreign currency debt relates to forward currency hedging by shipbuilders -- South Korea is home to the world's three biggest such as Hyundai Heavy Industries <009540.KS> and Daewoo Shipbuilding <042660.KS> -- to cover billions of dollars in new ship orders.
   Banks have had to borrow short-term dollars to square their foreign-currency positions after taking up dollar/won forward offers from shipbuilders.
   For a FACTBOX on the measures, click here. [ID:nSEO196381]
   "Next year, the won will not necessarily rise further," said a currency trader at a foreign bank in Seoul.
   Reflecting the view, the won turned lower with falling as much as 0.4 percent in the morning, although it is up almost 9 percent since the start of the year. (Additional reporting by Kim Yeon-hee; Editing by Neil Fullick) ((jongwoo.cheon@thomsonreuters.com; +82 2 3704 5665; Reuters Messaging;jongwoo.cheon.reuters.com@reuters.net)) ((If you have a query or comment on this story, send an email to news.feedback.asia@thomsonreuters.com))
Keywords: KOREA ECONOMY/CONTROL 
  
Thursday, 19 November 2009 05:35:09RTRS [nSEO238632] {C}ENDS

from Fan Fare:

Woman is smarter than a 5th grader, but it’s a secret

A Los Angeles woman kept it a secret from her husband for more than four months that she is smarter than a 5th grader, and more than that, she won $250,000 on a game show by proving how smart she is.jeff-foxworthy

Elizabeth Deister taped an appearance earlier this year on "Are You Smarter than a 5th Grader?" and she planned to watch it at home with her husband on Monday, when it aired on television. But those plans were interrupted and the Deisters were not going to get a chance to watch the broadcast, because it will be preempted by a telecast of the Los Angeles Dodgers versus Philadephia Phillies baseball playoff game.

from Financial Regulatory Forum:

S.Korea considers FX margin trading curbs -official

A South Korean bank clerk shows new 5,000-won ($4.93) bank notes at the headquarters of Woori Bank in Seoul    By Kim Yeon-hee and Lee Chang-ho
   SEOUL, July 8 (Reuters) - South Korea is considering imposing limits on currency margin trading to curb speculation, a senior official of the country's financial authority said on Wednesday, a move that may dent brokerage houses' efforts to expand into forex services.
   Margin trading allows investors to make leveraged bets on currencies and has grown increasingly popular in recent years among retail investors in South Korea and Japan.
   "We are considering a number of measures and will make an announcement soon," the official told Reuters, asking not to be identified until a decision was made.
   Steps to be taken could include raising the amount of collateral investors must park with margin brokers from the current 2 percent.
   Margin trades involve leverage of around 100 times or more than the amount of collateral, leaving the forex market more speculative and exposed to deep swings.
   Currently, about 20 currencies are traded via margin trading in South Korea, with the yen <JPY=> and euro <EUR=> the most popular.
   In April, the Nikkei business daily reported that Japan's Financial Services Agency was looking at limiting the maximum amount of leverage investors can employ for currency margin trading.
   Officials of futures trading firms are concerned about the upcoming curbs, saying they would limit their trading activity.
   But Chung Hae-geun, an executive managing director of Daewoo Securities, said the possible rules would bring forex margin trading into the regulatory boundary and help protect investors.
   South Korean brokerage companies, including Daewoo Securities <006800.KS> and Mirae Asset Securities <037620.KS>, have applied for licenses to offer forex margin and other futures trading, under a new capital markets law introduced in February.
   The won currency <KRW=> trimmed losses to close domestic trade at 1,273.50 against the dollar.
 (Additional reporting by Lee Soo-jung and Shin Jieun; Editing by Chris Lewis)
  ((yeonhee.kim@thomsonreuters.com; +82 2 3704 5646; Reuters Messaging: yeonhee.kim.reuters.com@reuters.net))
  ((If you have a query or comment on this story, send an email to newsfeedback.asia@thomsonreuters.com))
Keywords: KOREA FOREX/MEASURES 
   
Wednesday, 08 July 2009 08:29:26RTRS [nSEO103521] {C}ENDS

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