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Following the lead of Korean banks and state-run corporations, Korean private investors have begun investing in assets, including stocks and bonds, of U.S. financial firms that have been hit by the subprime mortgage crisis.
Though the amount of their investments is still small, the situation is the reverse of what happened during the Asian financial crisis 10 years ago. At the time, American investment banks and funds bought the assets of Korean financial firms and enterprises at knockdown prices.
Various equity funds have been introduced in Korea recently that are aiming to buy stakes in American investment banks whose stock prices have been halved. Some high-income Koreans are now investing large amounts in such funds.
Since mid-January, Samsung Securities has sold W16.6 billion (US$1=W944) worth of a private equity fund product named "Global IB Equity Fund." To buy into the fund, each investor must spend more than W100 million. The Global IB equity fund is investing in stocks of seven global investment banks, including Goldman Sachs, Merrill Lynch and Citibank.
The Korea Investment Trust Management has sold more than W7 billion worth of its "Wall Street Investment Bank Stock Fund," an equity fund that accepts small investments.
Institutional investors, including banks, insurance companies and asset management firms, are also enthusiastic about investing in stocks or low-grade bonds of American banks. Hana Bank recently decided to buy 1 million shares (worth US$50 million) of Merrill Lynch. The Korea Investment Corp., a foreign currency assets management firm, also invested in Merrill Lynch, buying a $2 billion stake in the investment bank last month.
The Korea Asset Management Corp. (KAMCO) has been looking for an American financial firm with insolvent bonds to invest about $500 million. The National Pension Service and large-scale asset management firms are also reportedly considering investing in bank stocks or real estate put up for auction in the U.S.
In the aftermath of the financial crisis 10 years ago, Goldman Sachs purchased Jinro at a giveaway price and turned a profit of over W1 trillion by reselling it to Hite Brewery a few years later. Merrill Lynch earned a huge profit after buying bonds of LG Card at discount prices. Citibank took over KorAm Bank and used it as a stepping stone for its expansion. These American banks, which earned high profits in Korea in the past, are now emerging as targets of Korean investment.
(englishnews@chosun.com )
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