Seven Korean Banks Shut Down So Far (EWY, KG, SHG, WF)
More Korean banks keep shutting down as regulators get serious about staving off a run on retail deposits. So far, the market has held up like a rock.
The tally of savings banks suspended from normal operation in the last month now stands at seven, of which six — including the biggest Korean institution in its class, Busan Savings Bank — have come in the last week.
As it is, the government is still allocating about 20 trillion won — roughly $20 billion — to fund the process of restructuring the country’s apparently failure-ridden banking sector.
Giants like Woori Finance Holdings Co. Ltd. (NYSE:WF) are already helping out in the bailout process, grabbing $44 million in bonds from failed banks and pondering outright absorption of at least one of them.
So far, KB Financial Group, Inc. (NYSE:KB) and Shinhan Financial Group Co. Ltd. (NYSE:SHG) have yet to get involved, although they have each expressed interest in getting a savings bank for themselves out of this.
Meanwhile, inflation pressures are reportedly becoming an outright “threat” to finance minister Yoon, so more interest rate hikes are likely to be in the cards.
iShares MSCI South Korea Index (NYSE:EWY) is the ETF to play here. Options and volatility are relatively cheap here as well. If EWY tumbles, there are plenty of fast money guys eager to pile on at these levels.
Emerging Money provides insightful and timely information about the increasingly important world of Emerging Market investments. CNBC Emerging Markets Contributor Tim Seymour leads the team of Emerging Money to bring you cutting edge global news and analysis.
About Tim Seymour: Tim is a founder of Emerging Money. He is a founder and Managing Partner at Seygem Asset Management, and The Emerging Markets Contributor to CNBC. Seygem Asset Management focuses on investing throughout the global emerging markets asset class. With a view that emerging and developing economies will continue to outpace the economic growth and advancement of developed economies, Seymour has devoted a career to investing in the dominant markets of tomorrow, today. Seymour’s career has included significant experience in both alternative asset management (hedge funds) and capital markets, having launched two hedge funds, and built the largest Russian broker dealer in the USA. Seymour started his career at UBS, focusing on international credit (cash, swaps, forex) in a specialized hedge fund group (New York). Seymour completed the firm’s training program after graduating with an MBA in international finance from Fordham University. Seymour received his undergraduate degree at Georgetown University.