South Korea’s output is continuing to accelerate, and the government needs to exit from its accommodative economic policies earlier than anticipated. The HSBC Korea’s purchasing managers’ index (PMI) rose from 55.6 in January to 58.2 in February — the highest since December 2007. New orders are coming in, and there are rising backlogs of unfulfilled orders. Shaw Capital Management: South Korea’s Economy - Employment too is rising suggesting that the current pace of growth will be sustained for the next several months. Inflation paced a little with consumer prices up 3.1% in January from a year earlier. But inflation in Korea is likely to remain stable for some months. The central bank is expected to tighten its monetary policy by starting to raise interest rates from the current record low of 2% in the later part of the second quarter as the government retains its focus on job creation and growth. Shaw Capital Management: South Korea’s Economy - Exports expanded 31% year on year, better than Reuters’ forecast of 22.7%. South Korea posted a much larger-than-expected trade surplus of $2.33 billion in February as ship deliveries boosted exports, while imports fell as holidays reduced crude oil and natural gas demand. The government expects a monthly trade surplus of more than $1 billion from March as demand improves. The current-account surplus is most likely to dwindle to around $17 billion this year from $42.7 billion in 2009 as imports rise. A new Bank of Korea governor, widely expected to be a more pro-government figure, will not rush to raise rates after taking office in April. Exports grew 31% from a year earlier to $33.27 billion, faster than the expected rise of 21%, while imports climbed 36.9% to $30.94 billion, exceeding a forecast of an expansion of 34.0%. South Korea, which is heading the G20 group of leading economies wants to leave an imprint of its presidency. Shaw Capital Management: South Korea’s Economy - It is trying to introduce a system of international currency swaps which it hopes will reduce global imbalances by lessening the need for countries to accumulate reserves, seen as one of the causes of last year’s financial and economic crisis. Shaw Capital Management - Every investor will achieve better long-term risk-adjusted results by working with a true open architecture advisor. Our philosophy is simple: almost every investor will achieve better long-term risk-adjusted results by working with a true open architecture advisor. Before Shaw Capital launched the open architecture revolution, investors had to make the unhappy choice between selecting an advisor who was independent, but unsophisticated (the traditional pension and endowment consulting firms), or selecting an advisor who was sophisticated but had conflicting interests (global banks, trust companies, money management firms). Today, virtually all investors faced with the challenge of managing a significant pool of capital can access open architecture advice. A true open architecture firm is completely independent of the rest of the financial services industry and accepts compensation only from its clients. In addition, open architecture firms must make the financial commitment to hire only the most experienced advisors, and those advisors must apply their experience to the issues that will most affect their clients' wealth. Matters like asset allocation and manager search are simply too important to be left in the hands of young analysts. We are proud of our role in leading the open architecture revolution, and look forward to introducing you to its benefits.

Shaw Capital Management Korea:  World wide recovery appears to have firmed up. In the UK the statistics have lagged behind the anecdotal signs of the same thing. No one still believes the ONS’s peculiar decision to call a revised GDP drop of 0.2% in the third quarter (now revised down from an initial estimate of 0.4%). The UK now have not merely surveys of purchasing managers but also

employment, production and retail sales figures, all of which suggest that the economy levelled off in the third quarter and could have possibly also started expanding then, and was definitely expanding in the fourth.

Shaw Capital Management: Debit Policy is Working Well in UK & US Part 2 of 2 The reason seems to be that the operation of the ‘inflation tax’ is arbitrary and therefore seen as unfair—those who pay it are often the most vulnerable—e.g. with pensions invested in government bonds—while those with wealth and good advisors can usually avoid it. Ordinary taxation, however unpopular it may be, can be spread across the populace in a fair way, and so can normal ‘Treasury cuts’, which command wide respect as the only way of checking inevitable bureaucratic waste.

Since debt has been issued over a long period on the assumption of such a target, the gain to the Treasury from a burst of inflation would be large; it would act like a windfall tax on bond investors.

Shaw Capital Management Korea: Debit Policy is Working Well in UK & US Part 2 of 2 - So what each of these governments needs to do is put in place a mechanism for the medium term that first brings down the deficit and then ensures that the debt/GDP ratio falls slowly with growth. Meanwhile for some time to come there will be a need for monetary ease as the financial system is nursed back to health; this will keep the financing costs down.

The growth rate of credit to the non-bank private sector remains exceedingly low; while other sources of liquidity have increased as noted earlier, it is still clear that liquidity is not generally available on competitive terms to many small firms and ordinary households.

What has happened so far is that larger firms and wealthier households have benefited from low rates of interest while small firms and poorer households have found it difficult to gain access to finance at all. This is no basis for a modern economy to function well and recover confidently. Yet it is clear that restoring competitive finance when banks have been so damaged will take some time; there is no definite date when one can yet predict it will occur, what with the new capital required, the new procedures to be implemented, the paying-off of government to be done and so forth.

Shaw Capital Management Korea: Debit Policy is Working Well in UK & US Part 2 of 2 - So what each of Our conclusion is that quantitative easing has worked to partially offset the credit crunch and will continue to be needed as the banking system is rebuilt. Furthermore fiscal policy too will need to be supportive throughout the coming fiscal year, 2010/11—even though a process must be set in place to reduce the public deficit over the following 5 10 years.  The threat posed by the banking crisis was massive and has not gone away; and while it is premature to celebrate, the policy response has so far been effective. It needs to be continued.