Markets cheer free trade deal

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Markets cheer free trade deal

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When Korea and the United States announced a free trade agreement early yesterday afternoon, the news boosted investor sentiment here and drove up both the Kospi and the Kosdaq indexes.
Analysts said the deal should have a positive impact on the market for the time being.
When Korea signed a free trade deal with Chile in the fall of 2002, the Kospi jumped nearly 8 percent over the next 20 days. Yesterday, the Kospi rose nearly seven points.
Exporters led the advance, and analysts agreed that free trade with the United States, one of Korea’s largest trading partners, will boost companies who rely heavily on exports. Kim Se-jung, an analyst at Shinyoung Securities Co., said that signing the free trade pact with the United States “is, for Korean exporters, like losing the sandbags around their ankles as they run a marathon.”
In 2006, Korea exchanged about $77 billion worth of goods with the United States. Park Hyo-jin, a strategist at Goodmorning Shinhan Securities Co., predicted that trade volume could reach $100 billion once the deal comes into effect.
“The stock markets will be buoyed by the enhanced competition, and by the recovery of the Korean economy through increased trade,” Park added.
Among exporters, automobile shares could benefit the most. Suh Sung-moon, an analyst at Korea Investment and Securities Co., noted that the lowered tariffs will increase exports to the United States for Hyundai Motor Co. and Kia Motors Corp.
“Korean carmakers can’t rely on domestic sales for much longer [to remain competitive], and exports are the answer,” Suh said. “And to have free trade with the world’s largest economy, not to mention one of our major customers, will certainly have positive effects.”
Tariffs on auto parts will also be abolished. A report by CJ Investment and Securities Co. said the tariff-free trade in car parts would help increase exports for Korean manufacturers, and also lower production costs at Hyundai’s and Kia’s U.S. plants.
The textile industry will also benefit from free trade. Complete tariff abolition is expected to take place over several phases, but because most Korean textile exports are high-tariff goods, Meritz Securities analyst Shim Jae-yeop said, “Even partial reduction could expand textile exports by $200 million.”
Korea’s textile exports to the United States were $3.6 billion in 2000, but have fallen every year since then, hitting $2 billion last year.


By Yoo Jee-ho Staff Writer [jeeho@joongang.co.kr]
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