(Yonhap Interview) Foreign investors eyeing developments in N. Korea: Standard Chartered CEO

SEOUL, Jun 20, 2009 (Asia Pulse Data Source via COMTEX) -- SCBFF | Quote | Chart | News | PowerRating -- Amid growing tension on the Korean Peninsula, foreign investor sentiment toward South Korea will depend on how the North Korean nuclear issue develops, the head of Standard Chartered Plc said Friday.

North Korea, which conducted a second nuclear test late last month, recently threatened to weaponize all plutonium it extracts and start enriching uranium in defiance of U.N. sanctions, intensifying risks in the region.

"Events concerning North Korea certainly do have an impact on investment sentiments towards South Korea ... I think much depends on how events unfold from here," Peter Sands, chief executive of Standard Chartered, said in an interview with Yonhap News Agency.

He said, however, that from the perspective of foreign investors, it is not easy to measure the current situation surrounding North Korea.

"How the future development concerning North Korea evolves will have some impact on investor sentiment. But I wouldn't exaggerate the degree of impact. People who invest in Korea are accustomed to a level of uncertainties around North Korea."

The South Korean stock and currency markets have been largely unscathed by recent North Korean nuclear and missile threats. On the day of the second nuclear test, the country's key stock index and the Korean won almost recouped earlier losses after tumbling heavily during the session. But experts remain cautious, as prolonged tension could increase volatility in the markets.

Turning to banking issues, Sands said a common challenge facing Korean banks, like others elsewhere, is high volatility.

"But Korean banks have demonstrated considerable resilience in responding to the (ongoing global financial) crisis, and I think the lessons from the Asian financial crisis learned a decade ago have proven to be very helpful in that regard," he added.

In the wake of the 1997-98 Asian financial turmoil, the Korean banking sector was rescued by government-led restructuring efforts and underwent a wave of consolidations.

Although local banks, saddled with high overseas short-term borrowing, suffered dollar shortages in the wake of the collapse of Lehman Brothers late September, strict regulations on home-backed loans and conservative business attitudes helped Korean lenders weather the global financial crisis.

"Those lessons meant that both the regulators and the banks have been somewhat cautious and that has proven to be a good thing," Sands said.

Meanwhile, Sands said his group is "very comfortable" with its Korean banking unit's capital position, adding that boosting or deploying capital will depend on the need.

SC First Bank Ltd. saw its capital adequacy ratio, a key measure of financial health, reach 11.33 percent as of the end of March, down from 11.44 percent three months earlier.

London-based Standard Chartered received a regulatory approval from the Korean government Wednesday to set up a financial services company, becoming the first foreign lender to do so in South Korea.

The British bank has expanded its business scope in South Korea by taking over a local mutual savings bank and setting up a brokerage unit in 2008 as part of efforts to create a financial holding company.

Standard Chartered acquired Korea First Bank in April 2005 for 3.4 trillion won (US$2.7 billion) and renamed it SC First Bank in September the same year, the largest-ever takeover by the British banking giant.

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