L2W - Ferry Sorrow & Economics, High Won, & O in Korea

1. National

1) Korea still in sorrow

The sadness of Apr 16 Sewol ferry incident has continued, with 275 dead and 29 still missing. A principle committed suicide out of shame he was save while many of his students have not. The Prime Minster had to submit his resignation, and President Park Geun-hye apologized for the government’s initial handling of the disaster. Outraged by KBS newsroom chief’s personal comparison of the Sewol tragedy to traffic accidents, the families of the victims staged a sit-in in front of the Blue House, demanding President Park to fire the head of KBS and to meet with them. Another tragedy also occurred as one rescue diver lost his life in his efforts to retrieve the victims from the water. Nearly 50% of news time is still about the ferry incident, nearly a month after the incident.

It is an irony that anti-government forces are taking advantage of the tragedy to overthrow Park’s regime, harassing Park to step down in street protests, but there are no protestors at all in front of the headquarter of Chonghaejin, the ferry operating company. It’s like Americans blaming George Bush and Whitehouse for 9/11, instead of Bin Laden and Al Quaeda.

2) Barack Obama in Korea

Mr. Obama made a two day visit to Korea on Apr 25. He consoled the families of the ferry boat victims, sent a strong message to Kim Jong-un not to tinker with nuclear tests, and agreed to delay South Korea’s takeover of wartime operational control, currently scheduled for 2015, during the visit to the U.S. Army base in Seoul with President Park. He also touched on diplomatic issues, bringing up China’s role to better control North Korea, and mentioning “comfort women was a terrible violation of human rights.”

Kim Jong-un must be ticked off by Obama’s comments in Seoul. Soon after Obama’s visit, North Korea’s news agency poured racial insults to Obama, like “Obama is a monkey to live in a zoo in Africa” or “Obama is a crossbreed.” Kim Jong-un should learn from Donald Sterling of LA Clippers on how damaging it can be to make racial slurs to the Americans.

2. Economy

1) High Won to cut export profits

With the constant increase of Korea Won against the U.S. dollar, export driven companies are in worries. It was 1,084 won per dollar on Feb 4, but got strengthened to 1,022 won on May 8, a 5.7% increase in three months. It was the strongest won value since Lehman Brothers crisis in Nov 2008.  Though the impact may be limited for big companies like Hyundai or Samsung that has hedging mechanisms, analysts believe their profit margins will weaken if the won strengthens to the 1,010 won level. Much more difficulties are expected for small and midsize exporters with less ability to hedge currency risks.

While high won is a bad news for Korean export companies, it was a good news for parents who send their children to the U.S. for schooling. My wife and I got into a panic in 2009 to find money for $40,000 tuition fee at Washington University in St.Louis for my first son, when the currency rate was running around 1,600 won at that time. We took a sigh of relief only after he managed to get a scholarship fund that covers most of the tuition. Attaboy!

2) Ferry incident’s negative effect in economy

The government has decided to pour 7.8 trillion won to provide support for regions and industries hit hard by the ferry incident and the sag in domestic spending that followed. According to the Seoul Association of Chartered Bus Transportation Business, almost all reservations of chartered buses for school trips since Apr 16 have been cancelled. Korea’s largest discount store E-Mart saw its sales drop by 3.5% in April, while its rival Lotte Mart also suffered 4.5% drop. Daily credit card spending got reduced by 4.6% after the Apr 16 accident. Housing transactions also reduced about 11% in April from March as “there have been fewer people willing to buy a house in the sorrowful national mood,” to a realtor in Seoul.

There was a big flood from typhoon Lusa in Gangwon Province in the east of Seoul in 2002, and many were in sorrow over the loss of lives and properties. While people were working hard for restoration in a village, there was a tourist group from outside, drinking, dancing and having good time, right next to the restoration workers. The drinking tourists were severely hammered by the media, but local authority asked more people to come to their town for drinking and dancing. Gangwon Province’s main industry was tourism.

3. Auto Industry

1) Big hands to Hyundai Genesis from IIHS

Hyundai’s new Genesis earned “Top Safety Pick+” ratings from the U.S. Insurance Institute for Highway Safety (IIHS) crash test, becoming the first passenger car to receive top grades in all 29 categories of the test.  IIHS said the redesigned Genesis received a “Good” rating in the small overlap frontal crash, and “Superior” for its front crash prevention system, the first time any Hyundai or Kia model to do so. Hyundai hopes the IIHS rating will boost its Genesis sales in the U.S. and globally, reaching 24,000 and 68,000 units, respectively, this year.  

.With the success of Genesis, Hyundai has chosen many good names for its future models. They are Exodus, Leviticus, Numbers, …….

Regards,

H.S.