Updates from the Managing Director

Deflationary crisis arising from plummeting investment and foreign  demand; How will South Korea respond? Yeouido is abuzz with a new panic, fueled by the wider Asian Crisis. With mass asset sell-offs and  plummeting investment in the past few weeks, fears of a recession have set in Korean markets. The  KOSPI is down 22% over the past 3 months in a historic drop, as inflation rates are widely expected to  continue their steep decline.  In response, the Korean government's GDP growth estimate has fallen to -1.5% without any signs of  recovery, stoking predictions of recession. Korea’s debt-to-GDP has skyrocketed, and unemployment is  now a staggering 8%. In recent months, President Kim Young-sam’s government has come under immense  public scrutiny for its economic policies; some experts fear severe political unrest may be brewing.

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Mass selling of Asian assets, equity markets in turmoil, foreign debt-to-GDP ratios skyrocketing Following the crisis in Thailand and falling profits of major Korean companies, investors worldwide have  reevaluated their investments in the region. What were once known as “Tiger economies” are now  experiencing shrinking asset values as investors sold off stocks and bonds by companies that were  perceived as “financially unsustainable”. Those that were highly leveraged also faced large reductions in  equity finance as investors fear that a further fall in consumer demand in the region would prompt rapid  cash outflows in the short term, and insolvency in the long term if companies cannot repay their debts.  Expert analysts warned that extremely high market to book ratios of large companies thought too big to fail  will eventually cause an asset bubble burst. Others argue that it has already started. Specifically, the Seoul  stock exchange fell...