South Korea: Farewell

Seoul has been fantastic.  It has been an interesting contrast to Tokyo—it seems less traditional but still very developed.  Very few bikes in the city, which is the opposite of Tokyo.  Having lived in New York, NYC is my baseline for comparing all big cities.  Seoul feels more like New York than Tokyo.  Seoul is a thriving, modern city.  It’s fun to see a Dunkin’ Donuts next to a very traditional Korean restaurant.  In a few short days, I have developed a taste for Korea’s spicy food.  I liked Kimchi before I arrived in Seoul, but now I can’t get enough of it!


Here are a few broad takeaways as I leave South Korea:

History plays a major role in shaping Korean economics and financial markets.  I heard several mentions of Japan’s occupation from 1910 to 1945.  The Korean War and the separation of North and South Korea provide the context to understanding the structure of the Korean economy.  The rise of the “Chaebols,” or the powerful Korean multi-nationals like Samsung, LG, and Hyundai is a direct result of policy to combat historical foes and North Korea.  It was interesting to hear South Koreans refer to their country as an “island.”  The border with North Korea effectively makes the country an island!

Korea is truly a study in contrasts.  The high standard of living, the prosperity, and the relative freedoms of South Korea could not be more opposite from the total repression and despair associated with North Korea.  We took a morning trip to the DMZ, and even went down into the third infiltration tunnel discovered in the 70’s.  It was a short drive from Seoul—one of the worst and most evil leaders in the world is only a few miles away from one of the economic miracles of modern times.  Compare North and South Korea—the same culture, geography, history, and language yet they feature completely different economic and political conditions.  Free markets and democracy matter!




It is increasingly clear to me that the Korean economy and financial markets are heavily influenced by exports.  This places great emphasis on relative currency values.  The Bank of Korea does little to hide its focus on exchange rates, and it is a major consideration when formulating policy.

My time in Seoul emphasized interesting themes that started in Japan—Central Banks rule the world, currencies are the vehicle for global adjustments, and there has been a rise of multi-national companies with major revenues in multiple currencies.

When I visit foreign countries, I love to read local newspapers.  Granted, I cannot read or speak Korean, but a review of The Korean Times or The Korean Herald in English give insight into the issues that matter to Koreans.  The day that I arrived in Seoul, the front page of The Korean Herald greeted me with the headline, “Korea, China sign free trade agreement.”  Here are a few excerpts:

  • “South Korea and China signed a free trade agreement Monday that is expected to become a platform for the two economies seeking new growth engines and to bring the 23-year bilateral cooperation up to a new level.
  • The gradual removal of tariffs on agricultural, maritime and manufactured products, as well as opening up those industries of the world’s largest market, is expected to give Korea’s gross domestic product a 0.96 percent increase and boost customer welfare by $14.6 billion within 10 years of the FTA effectuation, Seoul officials said.
  • The FTA will enable a market with a population of 1.4 billion and GDP of $12 trillion. It also makes Korea the only country that has FTAs with the world’s three largest economies ― the U.S., EU and China. Korea now has deals encompassing 52 nations, accounting for 73.45 percent of the global economy…
  • The Korea-China FTA is regarded as a pivotal pact for both countries.
  • China is by far the largest country Korea has made such agreements with. Korea is China’s largest importer, taking 9.7 percent of its imported market, followed by Japan with 8.3 percent and the U.S. with 7.8 percent.
  • For China, this is the largest bilateral deal in terms of trade volume. “This is the most high-level, specific but all-around, and balanced FTA we have had by far,” Chinese deputy trade minister Wang Shou Wen told reporters.”

Several discussions pointed to the continued and growing importance of China for South Korea’s economy and financial markets.  This presents both risks and opportunities for South Korea, but we would expect one of the world’s great exporters to lead the way in free trade with China.  South Korea is in an interesting neighborhood with its past history with Japan, its menacing neighbor to the North, and an emerging economic partnership with China.  Add a historically close relationship with the United States, and it’s easy to see risks and opportunities in Korean financial markets.

Special thanks to Brennan Staheli, Evan Fiala, and the Lunt Capital team for their contributions to this report.