Last Two Weeks in Korea (August 8)

1. National

1) Seoul in under water

Put Beverly Hills in Manhattan, and it will make Gangnam, the district south of Han River in Seoul where Renaissance hotel is located. This affluent area turned into a disaster zone when it received 440mm (17.3 in) of rain on July 27, the most daily precipitation in Seoul since Aug 2, 1920. A total of 60 people were killed in landslides in Seoul and other parts of the country, and Gangnam turned into a Venice for a day.

While Korea gets hit by natural disasters from time to time, mostly by typhoons in the summer, its damage magnitudes are usually much smaller compared to other nations. The record flood in Gangnam last week was a baby pee, if the Katrina in New Orleans in 2005 was a Niagara Falls.

2. Economy

1) Samsung to drop its MRO business

Samsung announced that it will pull out of the MRO(Maintenance, Repair and Operations) business, finally yielding to Korean government’s pressure on large conglomerates. MRO companies are service providers that procure and oversee expendable goods like stationary and tools for corporations. Samsung is to sell 58.7% of iMarketKorea, held by nine Samsung companies. The government recently accused Korea’s family owned conglomerates to stifling competition and growth in the local MRO industry by giving preferential treatment to their affiliated MRO companies over others. President Lee Myungbak even stressed the need for shared and balanced growth between large conglomerates and small and medium sized enterprises. Many are waiting to see whether other conglomerates like Hyundai and LG will follow suit.

My wife is in dilemma over balanced growth. She has quite a few Hyundai stocks, but her husband is working for a small and medium sized enterprise supplying auto parts to Hyundai. If she keeps buying Hyundai stocks despite recent S&P downgrading of U.S. economy, I should suspect something goes on between she and Hyundai Chairman Chung.

2) More men living with their parents-in-law

According to a survey by Statistic Korea, more and more men live with their wife’s parents for economic reasons. Their number increased three times from 18,088 in 1990 to 53,675 in 20101. By contrast, the number of women living with their parents-in-law dropped more than half from 444,634 to 198,656 in 2010. The report reflects only cases where in-laws take responsibility for the livelihood of their family, including their sons or daughters-in-law. Childcare is one of the main reasons for the phenomenon as women feel more convenient to live in their own parents’ homes.Another key reason is that women now have more say in the family because they work. The number of wife breadwinners increased 1.5 times from 1.79 million in 1990 to 4.5 million last year.

Koreans traditionally had taken it a shame to live with wife’s parents as it meant you are a loser unable to feed your own family, and there is a Korean proverb that says “Don’t live in your wife’s parents home as long as you have three buckets of barley.”  With women power got so bigger these days in Korea, however, you sometimes have to live with your parents-in-law even if you have three buckets of gold bars, if your wife says so.

3. Auto Industry

1) Hyundai & Kia ranks 5^th in the first half

Hyundai and Kia sold a combined 3.19 million units globally in the first six months this year, up 15.9% from the 2.75 million during the same period last year, the fastest growth rate among all the car makers. GM was the first with 4.64million, followed by VW (4.09 million) and Toyota (3.48 million).  Renault-Nissan sold 3.43 million units, just 140K units more than Hyundai and Kia. Ford ranked 6^th after Hyundai/Kia with 2.4 million units

The banners flying all over in Hyundai in 1995 had a GT-10 logo inside, to encourage the employees to reach the goal of Global Top 10 car maker in 10 years in 2005.  Hyundai bought bankrupt Kia in 1998, and now became a GT-5. Quite an achievement for a company that had to import components from Ford U.K for the license assembly of a few thousand Cortina and Mark IV models 35 years ago when Hyundai was probably GT-30.

2) Hyundai to go green with hybrid

Hyundai Chairman Chung Mongkoo announced Hyundai will begin foregrounding its new hybrid models to strengthen its position in environmentally conscious U.S. market. Sales figures are bolstering Chung’s announcement. Hyundai Sonata Hybrid sold 1,780 units in the U.S. last month, up 20% from June to stay ahead of Honda Insight and Ford Fusion. Its sister Kia Optima Hybrid saw its sales go up 300 percent to 300 units last month. Hyundai is a few steps ahead in terms of its cars’ average fuel efficiency, which now stands at 35.7 miles gallon, 0.2 miles better than the U.S. standard set for 2016.

Hyundai has two hybrid engines. One is 2.4L Theta hybrid engine for Sonata and Optima sold in America, and the other is 2.0L Nu hybrid for the same models in Korean market. Not sure why Hyundai use different hybrid engines for the same models, but Hyundai engineers probably decided to put bigger engines for the U.S. market after they saw long lines in MacDonald and Burger King restaurants in the U.S. 

Regards,

H.S.