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Enron Mail |
---------------------- Forwarded by Vince J Kaminski/HOU/ECT on 03/23/2001
06:08 PM --------------------------- Gwyn Koepke@ENRON 03/23/2001 03:40 PM To: Vince J Kaminski/HOU/ECT@ECT cc: Subject: FYI Re: South Korea curve: FX and inflation, dated 1/8/2001 ---------------------- Forwarded by Gwyn Koepke/NA/Enron on 03/23/2001 03:40 PM --------------------------- Gwyn Koepke 01/12/2001 11:34 AM To: Cindy Hudler/HOU/ECT@ECT cc: Subject: FYI Re: South Korea curve: FX and inflation, dated 1/8/2001 ---------------------- Forwarded by Gwyn Koepke/NA/Enron on 01/12/2001 11:34 AM --------------------------- Gwyn Koepke 01/11/2001 06:56 PM To: Monica Reasoner/HOU/ECT@ECT cc: David Port/Market Risk/Corp/Enron@ENRON, Rudi Zipter/HOU/ECT@ECT, Frank Economou/NA/Enron@Enron, Maureen Raymond/HOU/ECT@ECT Subject: Re: South Korea curve: FX and inflation, dated 1/8/2001 Monica, In preparing the FX curve, we assumed the following main points: General outlook: a slightly more aggressive depreciation rate than the consensus forecast and the forward market would indicate on the short-end because of the lack of complete, measurable and sustainable progress in the financial and corporate restructuring efforts. The won depreciated more than most analysts expected at the end of last year because of heightened concerns regarding the government's banking sector reform program. If the Koreans follow the Japanese model and continue to put off badly needed banking sector reform, the country is in for a long period of economic uncertainty. Reform: We think the financial restructuring effort (bank mergers, etc, which have led to public strikes recently) is going to take at least two years. Industrial restructuring has been slow moving, the 50% drop in the stock market since early 2000 is strong evidence of that, and the banks in their weak state are not creating the liquidity needed to boost the economy. Although the IMF package has been largely paid off, these underlying problems remain. The goal of government-sponsored financing is to shore up the banking sector (which is burdened by non-performing loans) and to close nonviable companies, but reform efforts have appeared to languish of late and the cost of the program by some measures is as high as 26 percent of GDP. Failure to find investors for the Daewoo Motor Company and Hanbo Steel should warn investors of the impediments to reform in the Korean market. Exports: The weak Japanese yen (following stagnating demand at home in Japan and abroad, coupled with a weak financial system and a huge public debt burden) will likely cause the central bank to be very cautious about any intervention to stem any possible slide in the won. This is because Korea's largest competitor on world product markets is Japan, and a weak yen hurts Korea's export competitiveness (exports account for half of the Korea's GDP). Korea's FX reserves are strong. Risks to Forecast: The risks to our forecast are those factors which could lead to negative investor sentiment toward Korea. Included in these risks are stalls in restructuring or that restructuring efforts uncover serious resistance by banks or corporates (chaebols) to proceed smoothly with reform or the government succumbs to public pressure to soften the reform objectives or implementation timeframes. Gwyn Koepke To: Gwyn Koepke/NA/Enron@Enron cc: David Port/Market Risk/Corp/Enron@ENRON, Rudi Zipter/HOU/ECT@ECT, Frank Economou/NA/Enron@Enron Subject: South Korea curve: FX and inflation, dated 1/8/2001 Thank you for providing the South Korea curve. Can you please provide a more detailed explanation regarding you assumptions to calculate the curve? The SK-Enron team is interested in knowing your view points on the market. Thanks again Monica ---------------------- Forwarded by Monica Reasoner/HOU/ECT on 01/08/2001 03:15 PM --------------------------- Maureen Raymond@ENRON 01/08/2001 03:34 PM Sent by: Gwyn Koepke@ENRON To: Monica Reasoner/HOU/ECT@ECT cc: Cindy Hudler/HOU/ECT@ECT, Pushkar Shahi/ENRON@enronxgate Subject: South Korea curve: FX and inflation, dated 1/8/2001 Monica, Please find attached an updated forward curve for the Korean won and inflation for 20 years dated as of 1/8/01. Gwyn Koepke for Maureen Raymond-Castaneda
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