ID :
54328
Wed, 04/08/2009 - 10:00
Auther :
Shortlink :
https://www.oananews.org//node/54328
The shortlink copeid
S. Korea's foreign currency liquidity conditions improving
SEOUL, April 7 (Yonhap) -- South Korea's foreign currency liquidity condition is improving as local banks beef up their efforts to borrow from overseas and the country's current account balance returns to the black, analysts said Tuesday.
Korean banks, saddled with high overseas short-term borrowing, had been suffering
from dollar shortages sparked by the collapse of Lehman Brothers Holdings Inc. in
mid-September. Squeezed dollar liquidity conditions prompted the local currency
to tumble 25.7 percent to the U.S. dollar last year alone.
But since mid-March, rising signs that the liquidity situation of local banks is
improving and the current account's switch to a surplus have boosted the local
currency. The Korean won rose almost 11 percent to the greenback in March.
"South Korea's once-frozen dollar liquidity condition is thawing smoothly," said
Jeon Seung-ji, a currency analyst at Samsung Futures Inc.
"Local banks and companies have begun to sell foreign currency denominated bonds
and spreads on the country's credit default swaps (CDSs) are falling." The spread
on CDSs is the cost of hedging credit risk on corporate or sovereign debt.
Some local banks have succeeded in borrowing from overseas recently and more debt
sales will likely follow. The government also plans to sell debt in overseas
markets to secure liquidity following a failure in late September.
Hana Bank, South Korea's No. 4 lender, has raised US$1 billion by selling
government-guaranteed bonds, becoming the first local lender to tap into a state
debt guarantee program.
According to sources, overseas borrowing by local banks may top $2 billion in
April and May. Shinhan Bank is in the process of borrowing over $300 million from
overseas markets and the state-run Industrial Bank of Korea is seeking to raise
about $1 billion by floating bonds, sources said.
Indicators reflecting the country's foreign currency liquidity situation also
showed signs of improvement.
South Korea's trade surplus reached a record $4.6 billion in March as imports
dropped more sharply than exports. The country's current account swung to a
surplus in February due to a sharp fall in imports and the central bank predicted
that South Korea is likely to post a record surplus of around $5 billion for
March.
The rollover ratio on maturing foreign debt has been also on the upward trend.
The ratio fell to 54.5 percent in October due to a severe credit crunch, but has
since recovered to 106.3 percent in March, according to the country's financial
watchdog.
"Overseas borrowing conditions facing local banks improved in March, enabling
them to smoothly roll over their foreign debt," Ha Keun-cheol, an official at the
Bank of Korea said.
But despite rising optimism, some analysts expressed caution that local banks
still have a high level of short-term foreign debt, which could prompt them to
have further difficulty in servicing debts if the credit condition dries up due
to possible global financial market jitters.
Korean banks, saddled with high overseas short-term borrowing, had been suffering
from dollar shortages sparked by the collapse of Lehman Brothers Holdings Inc. in
mid-September. Squeezed dollar liquidity conditions prompted the local currency
to tumble 25.7 percent to the U.S. dollar last year alone.
But since mid-March, rising signs that the liquidity situation of local banks is
improving and the current account's switch to a surplus have boosted the local
currency. The Korean won rose almost 11 percent to the greenback in March.
"South Korea's once-frozen dollar liquidity condition is thawing smoothly," said
Jeon Seung-ji, a currency analyst at Samsung Futures Inc.
"Local banks and companies have begun to sell foreign currency denominated bonds
and spreads on the country's credit default swaps (CDSs) are falling." The spread
on CDSs is the cost of hedging credit risk on corporate or sovereign debt.
Some local banks have succeeded in borrowing from overseas recently and more debt
sales will likely follow. The government also plans to sell debt in overseas
markets to secure liquidity following a failure in late September.
Hana Bank, South Korea's No. 4 lender, has raised US$1 billion by selling
government-guaranteed bonds, becoming the first local lender to tap into a state
debt guarantee program.
According to sources, overseas borrowing by local banks may top $2 billion in
April and May. Shinhan Bank is in the process of borrowing over $300 million from
overseas markets and the state-run Industrial Bank of Korea is seeking to raise
about $1 billion by floating bonds, sources said.
Indicators reflecting the country's foreign currency liquidity situation also
showed signs of improvement.
South Korea's trade surplus reached a record $4.6 billion in March as imports
dropped more sharply than exports. The country's current account swung to a
surplus in February due to a sharp fall in imports and the central bank predicted
that South Korea is likely to post a record surplus of around $5 billion for
March.
The rollover ratio on maturing foreign debt has been also on the upward trend.
The ratio fell to 54.5 percent in October due to a severe credit crunch, but has
since recovered to 106.3 percent in March, according to the country's financial
watchdog.
"Overseas borrowing conditions facing local banks improved in March, enabling
them to smoothly roll over their foreign debt," Ha Keun-cheol, an official at the
Bank of Korea said.
But despite rising optimism, some analysts expressed caution that local banks
still have a high level of short-term foreign debt, which could prompt them to
have further difficulty in servicing debts if the credit condition dries up due
to possible global financial market jitters.
