Schroders uses Korean crisis to build some positions

15th April 2013

As South Korea raises its alert level in response to the North’s increasingly belligerent rhetoric on potential missile tests, Korea’s stock market has taken a hit says Sang Chul Kim, Head of Local Investment, Schroders Korea.

The KOSPI index has lost around 5% of its value in recent days but Schroders points out that historically the market has usually rebounded.

The note says: “If we look back on the history of market movements after past tensions, the market quickly rebounds after the initial correction. We are assuming the base case scenario of a one-off event, such as a test missile launch, where the market tends to recover after it has taken place.”

The fund manager has even added to positions.

“Foreign investors are putting pressure on the index due to the perceived uncertainty, and intraday volatility is increasing accordingly. Our stance remains largely unchanged, though. Many market participants have taken the view that this risk is an opportunity to buy. We ourselves have maintained our prior investment views, while also taking advantage of the current volatility to add to certain positions.

More generally, Schroders says the fall in the yen remains an issue.  The note continues: “We remain wary of names with interests in heavy machinery which are under further competitive pressure from Japanese companies, given the recent weakness of the yen. These companies are already starting to gain market share in China. We currently prefer to focus on technology companies that have a global competitive edge compared to their Japanese peers. These include internet and gaming companies, along with some domestic names, which are set to benefit from the China consumption story and further stimulus policies from the Korean government.”

39 thoughts on “Schroders uses Korean crisis to build some positions”

  1. anteos says:

    interesting article Shaun.

    Its a no-win scenario really. afaik the banks are still deleveraging. And yet we have an economy who can only grown through debt. Which party would stop HPI and destroy the economy?

    1. Anonymous says:

      Hi Anteos

      We will continue to have problems until we face up to all the problems of the banking sector. But we have followed the route of mergers and can-kicking like virtually everyone else. It is like our ruling class are continually listening to Blur’s “There is no other way” on repeat. Whilst they do this there will be more “surprises”.

      The only possibility for change is after the next election as whoever wins it will want to kitchen-sink as many problems as possible.

  2. Forbin says:

    “Drawing up a revised standard for derivative contracts is just the first
    step; the next and harder step is effecting a move of the hundreds of
    trillions of dollars of derivatives onto a revised set of contacts.”

    Sound like an excuse to do nothing at all

    Everyday contracts expire and as they do you go onto the new variant , you can always take your business else where .

    Sounds like they havent even done the first step since 2008

    Ofcourse the whole idea was by 2018 everyone would have forgotten as the economy would have been in fit shape and motoring along ….

    Seems they miscalcualted , hence the short term fix of yet another housing boom …… with the bust to follow

    its not economics here but politics

    Forbin

    1. dutch says:

      Forbin,

      One does wonder why retail banks need to be conducting derivative deals in the first place.

      I mean we managed before interest rate swaps/CDS became available.

      http://www.dollarsandsense.org/archives/2012/0512bondgraham.html

      ‘ In 2008 when the world’s biggest banks stumbled toward insolvency,
      the U.S. Treasury stepped in to inject capital through the Troubled
      Asset Relief Program (TARP). TARP allowed the banks to offload or
      restructure their most toxic holdings, including many derivatives like
      interest rate swaps.
      Four years later no such relief has been mobilized for cities,
      counties, and public agencies suffering from the toxic interest rate
      swaps they have been forced to hold.’

      1. shrimpers says:

        Hi Dutch, lest we forget, GS was in a tail spin but Paulson, Geither etc etc are all ex GS…thats why they were paid out 100 cents on the dollar for worthless s**t byt he taxpayer…nuff said..

        1. dutch says:

          quite shrimpers.Not only GS but JPM etc as well.The investment banks were then allowed to take deposits as well iirc

          nothing short of scandalous.

          the shadow banking systems had all got too big and needed to wind their necks in.Now you’ve Chinese banks sat on loans that are collateralised on steel etc—which of course never goes up and dwon in price

    2. Jim M. says:

      ” Macroeconomics isn’t a science (in the modern sense of the word, i.e. having to do with the observation of the physical world). It is often described as a “social science”, but that is a clumsy oxymoron. Though science can play a supporting role (e.g. cliometrics in history), the true object of study in economics is human behaviour, hence the inescapable reduction to moral
      philosophy.

      The economy, as an object of study, is a human construct (or gestalt), both in the sense of the aggregate of decisions by individual “utility maximisers” and in the sense of a projected, quasi-religious belief. The urge to interpret it as a science, through mathematical models and “laws”, is an attempt to dehumanise and depoliticise it for hegemonic reasons.

      There is no economic “law” that cannot be proved or disproved at
      some time or place, so economics as a discipline fails the falsifiability test proposed by Karl Popper. However, that can also be twisted to suggest we can never know anything with assurance and should therefore cleave to the tried and tested (the reactionary recourse of Hayek, Oakeshott et al).

      Economics is politics. No more, no less.”

      I didn’t write that, but I rather wish I had.

    3. Anonymous says:

      Hi Forbin

      Just to say that in the world of Sir Humphrey and Sir Frank that “Sound like an excuse to do nothing at all” was described as masterly inaction and was a considered a compliment!

  3. Mike from Enfield says:

    Hi Shaun,
    It seems then that we have a man with a record as a recidivist failure who has no plan as he believes it’s all just too difficult. Not very inspiring is it?

    A naive question no doubt…but is there any sort of credible democratic mechanism to withdraw these snouts from the public trough? Or must we accept that everybody involved in this grubby area – so-called ‘regulation’ – can pretty much do (or not do) whatever they like?

    1. Jim M. says:

      We could, as a society, perhaps stop voting into power a political class who, whilst perhaps not being as bright as our fantastically clever top financial wizards, have got the whole sense of entitlement and reward of recidivist failure down to a tee.

      Silly, silly, naive old me, eh?

  4. dutch says:

    I find it amazing that you have to visit relatively unvisted corners of the web to find anyone asking the most basic question of our central bankers/regualtors.

    It appears,without exception seemingly,that none of their abject failings in so many respects,have been held up to scrutiny and that virtually none of them have suffered even the slightest hint of a dint in their career progression for said failings.

    As someone so succinctly put it,
    ‘the people we’ve got to sort this mess out(2008 finacial crisis) are all the ones that didn’t see it coming’

    So sad that our political class are either too dumb or too ‘owned’ to do the right thing.

    1. Forbin says:

      if Sir Merve the Swerve dodging off with millions pensions and gong did n’t tell us that then nothing will :-)

      Forbin

      Popcorn – fourtunatley Merve has not bought it all …. yet

      1. Jim M. says:

        “fourtunatley”

        Uncharacteristically wide of the mark there, old chap!

        Are you not well? 😉

  5. Forbin says:

    uh Shaun ,

    just incase we wonder were we are in the order of things I found this picture of the Banks and us

    “http://www.designbolts.com/wp-content/uploads/2013/06/despicable_me_2-wallpaper-hd1.jpg”

    The Banks are wearing grey btw , in case you’re wondering ( yes we’re yellow ) :-)

    Forbin

    1. Jim M. says:

      “But it’s so fluffy!?!”

      1. Anonymous says:

        Hi Guys

        Thanks for the cartoons which do rather sum things up. The Bank of England has just tweeted rather a hostage to fortune as you can see below..

        pic.twitter.com/gDbk3wPiIH

  6. Anonymous says:

    It actually mandates that 8% of a bank’s liabilities must be bailed in
    before there can be any recourse to public money or industry financed
    resolution funds.

    As deposits are liabilities are we saying the next UK bank that goes under sees an 8% bail-in?

    1. dutch says:

      the 8% taking the hit would equity holders,bond holders,retained earnings getting wiped out etc.

      Deposit holders are last in the chain to get hit.

      Besides govt gurantees the first £80k,so most depositors would be left alone.

      1. Anonymous says:

        I see. 8% is pretty low then. Why can’t bond holders be completely wiped out before public money is used!

        1. Anonymous says:

          Hi Progrock

          That could be called the cry of the Irish after what took place across the Irish Sea…

        2. dutch says:

          great question prog

          that’s what capital ratios basel etc is all about.reducing the need for bail outs and bailing in the equity and bond holders instead.

          However,given the smash that’ll be inbound some time soon for UK estate agents,there’s still a reasonable chance we’ll get a Cypriot style haricut here.

          as to why RBS equity holders retained 13% of the mess that still is RBS,I have absolutely no idea.

          can anyon else enlighten us?

      2. Paul C says:

        Why don’t we just do that then. Reset the banks and debt mountain. Get the Government to print enough money to give out to depositors up to £80K. We could re-instate the local town bank manager salary for ALL bankers just as if it was 1963.

        1. Anonymous says:

          Because the claim on the debt gives the establishment control over the masses in one fell swoop.

      3. Eric says:

        It amazes me that many people see the Financial Services Compensation Scheme as the ultimate protection of their savings, when in practice it protects the banks from runs.

  7. shrimpers says:

    Hi Shaun, yes indeed Cunliffe is yet another amongst thousands of talentless jobsworths that are ruining this country in tandem with the manifest avarice of the elites – the undeserving rich.

    As for the frenzy of gorging lawyers involved with unravelling Lehmans, it is all reminiscent of the central case of Jarndyce vs Jarndyce in Dickens’ ‘Bleak House’ whereby when the case is eventually settled there is nothing left for the plaintiffs due to the fees of the vulturous legal profession

    1. Anonymous says:

      Hi Shrimpers

      Thank you for the Bleak House reference and yes there is much that is familiar today about the critique written then by Charles Dickens isn’t there? As to the jobsworths Dickens called his equivalent “Barnacles” if I remember correctly.

  8. Noo 2 Economics says:

    The banks should have been allowed to go under in 2008/2009, taken over by Govt, regulated (no lobby groups left to twist the politicos arms) recapitalised and sold back to private ownership at a profit to the Exchequer.

    The nature of the resale should have tried to arrive at a similar position to the US where I believe they have about 7000 banks. Part of the regulation should have banned any one bank from having more than a 5% market share and Investment banks being standalone entities – not internal departments of retail banks.

    End of too big too fail. Too late now they missed a once in a lifetime opportunity – I bet the big four are even bigger now (compared to GDP) than they were before the crisis.

    1. Anonymous says:

      You’re an optimist. We haven’t split retail banking from investment banking, we haven’t fixed the implicit bailout guarantee described as to big to fail. A pessimist might predict another bank implosion giving another chance to break them up.

      1. Noo 2 Economics says:

        If another bank implosion arrives than it will be a global economic implosion which I do not relish – I’m not always an optimist.

  9. therrawbuzzin says:

    I’d rather have a vasectomy than advise my offspring to become lawyers.
    The corrupt, festering Twin Towers of Westminster & City of London are, by far, my largest motivation for supporting Scottish Independence

    1. Anonymous says:

      Isn’t just London.

      Reykjavik, Dublin, New York ….

      Are the politicians and lawyers in Holyrood any different ?

  10. Paul C says:

    I noticed Lloyds bank advertising a 4% current account on TV yesterday. Finally one of the big four is standing side by side with Santander. It does rather confirm the TBTF and oligopolistic offer in a controlled market. Co-op is gone (not big enough to compete). Soon we can enjoy identical “personal treatment” as the monster banks merge social networking technology with monopsony practices. Apparently banks can now ask loan & mortgage applicants when and where they eat out, their hairdresser and gambling habits etc, not long before they do information sharing like the car insurers do, so that everyone expenditures are mapped to one another. Phase 2 is for the Government to access the information sharing network (for regulation purposes) and then taxation insight will be complete….

    I can’t wait….

  11. Eric says:

    Hi Shaun, Another great blog. It really is a sad and sorry story. I can’t believe the men in grey suits can be so tardy – maybe there are some powerful forces pushing the other way. OTOH maybe they are all on the same side. The side we call the 1%.

  12. realfinney says:

    The most important thing to remember when kicking tyres, is that if the wheels fall off as a result, people may expect you to fix it. The ginger tapping of UK banks delivered by Sir Jon suggests he’s familiar with the potential for work.

  13. dutch says:

    And Glass Steagall was repealed in 1999!!!!!Coincidence?

    As Delboy would say,pretentious?Moi?

  14. Forbin says:

    dutch , I think its more than just co-incideded

    In fact theres no reason to stop its re-enactment

    except TPTB like their money and are scared of loosing it

    It will never happen as with all scams follow the money and you’ll see who has it is running the show… its despicable!

    Apparently theres no media that will challenge the Top and no Democratic solution either as no party will rock the boat – it they bring it up they are open to the attack that they were complicit

    A controlled Bank collapse is needed with small despositors covered

    not gonna happen

    Forbin

  15. therrawbuzzin says:

    That line comes from Fawlty Towers.

  16. dutch says:

    http://tvtropes.org/pmwiki/pmwiki.php/Main/GratuitousFrench
    Miss piggy apparently.You live and learn :-)

  17. therrawbuzzin says:

    Series 2 “The Psychiatrist” 1979.

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