[FOUNTAIN]Breaking up is hard to do

According to Stephen Roach, a chief economist at Morgan Stanley and one of the best investment analysts on Wall Street, the Korean and the U.S. economies are decoupling.

"Decoupling" is the hottest term in the Korean stock market, which has turned away from following the U.S. markets as a couple. The United States has had a growing influence on the Korean market during the last decade of open financial markets.

By the end of last year, U.S. investors held 5 trillion won ($4.2 billion) worth of stocks in the Korea Stock Exchange, which amount to 57 percent of the stock owned by foreign investors. It is not an overstatement that if New York coughs, Seoul suffers a cold.

But in June, U.S. stocks nosedived to the lowest since the Sept. 11 terrorist attacks, but Korean or Japanese markets were not affected much. Last week, Korean markets rose each day, seeing more than a 6 percent increase in both Korea's main index, Korea Composite Stock Price Index, and tech-heavy Kosdaq. Foreign investors, who prospected Korea's economy bright, bought 400 billion won worth of stocks, which pushed up the value of the Korean won. The won-dollar exchange rate plummeted to around 1,200 won against the greenback.

The International Finance Center, under the Ministry of Finance and Economy, believes that the decoupling trend is attributable to the sagging U.S. economy. A sluggish U.S. economy weakened the dollar, which led to an outflow of dollars to overseas stock markets, which again made the U.S. stock markets bearish, the agency said. In the meantime, stock markets in Korea, Japan and European countries prospered. Cases of large scale accounting fraud at Enron and Worldcom broke down trust, another asset of the U.S. economy.

Decoupling is not confined to the stock market in Korea. Roh Moo-hyun, the presidential candidate of the ruling Millennium Democratic Party, seems to want to decouple from President Kim Dae-jung, who is a lame duck burdened by the political scandals of his sons.

During the last administration, Lee Hoi-chang, then presidential candidate of the ruling party, coldly asked then-President Kim Young-sam to leave the ruling party. Whether it be the U.S. economy or Korean president, lack of power and trust invite decoupling. But decoupling will not last forever, because the U.S. and Korean economies cannot go their separate ways forever. I wonder how long the decoupling between the U.S. and Korean economies will last.

The writer is a JoongAng Ilbo editorial writer.

by Sohn Byoung-soo