---------------------- Forwarded by Vince J Kaminski/HOU/ECT on 03/23/2001 
06:08 PM ---------------------------


Gwyn Koepke@ENRON
03/23/2001 03:40 PM
To: Vince J Kaminski/HOU/ECT@ECT
cc:  
Subject: FYI Re: South Korea curve: FX and inflation, dated 1/8/2001


---------------------- Forwarded by Gwyn Koepke/NA/Enron on 03/23/2001 03:40 
PM ---------------------------


Gwyn Koepke
01/12/2001 11:34 AM
To: Cindy Hudler/HOU/ECT@ECT
cc:  

Subject: FYI Re: South Korea curve: FX and inflation, dated 1/8/2001


---------------------- Forwarded by Gwyn Koepke/NA/Enron on 01/12/2001 11:34 
AM ---------------------------


Gwyn Koepke
01/11/2001 06:56 PM
To: Monica Reasoner/HOU/ECT@ECT
cc: David Port/Market Risk/Corp/Enron@ENRON, Rudi Zipter/HOU/ECT@ECT, Frank 
Economou/NA/Enron@Enron, Maureen Raymond/HOU/ECT@ECT 

Subject: Re: South Korea curve: FX and inflation, dated 1/8/2001  

Monica,

In preparing the FX curve, we assumed the following main points:

General outlook: a slightly more aggressive depreciation rate than the 
consensus forecast and the forward market would indicate on the short-end 
because of the lack of complete, measurable and sustainable progress in the 
financial and corporate restructuring efforts.  The won depreciated more than 
most analysts expected at the end of last year because of heightened concerns 
regarding the government's banking sector reform program.   If the Koreans 
follow the Japanese model and continue to put off badly needed banking sector 
reform, the country is in for a long period of economic uncertainty.  
Reform: We think the financial restructuring effort (bank mergers, etc, which 
have led to public strikes recently) is going to take at least two years.  
Industrial restructuring has been slow moving, the 50% drop in the stock 
market since early 2000 is strong evidence of that, and the banks in their 
weak state are not creating the liquidity needed to boost the economy.  
Although the IMF package has been largely paid off, these underlying problems 
remain.  The goal of government-sponsored financing is to shore up the 
banking sector (which is burdened by non-performing loans) and to close 
nonviable companies, but reform efforts have appeared to languish of late and 
the cost of the program by some measures is as high as 26 percent of GDP.  
Failure to find investors for the Daewoo Motor Company and Hanbo Steel should 
warn investors of the impediments to reform in the Korean market.  
Exports:  The weak Japanese yen (following stagnating demand at home in Japan 
and abroad, coupled with a weak financial system and a huge public debt 
burden) will likely cause the central bank to be very cautious about any 
intervention to stem any possible slide in the won.  This is because Korea's 
largest competitor on world product markets is Japan, and a weak yen hurts 
Korea's export competitiveness (exports account for half of the Korea's 
GDP).  Korea's FX reserves are strong.  
Risks to Forecast: The risks to our forecast are those factors which could 
lead to negative investor sentiment toward Korea.  Included in these risks 
are stalls in restructuring or that restructuring efforts uncover serious 
resistance by banks or corporates (chaebols) to proceed smoothly with reform 
or the government succumbs to public pressure to soften the reform objectives 
or implementation timeframes. 

Gwyn Koepke 




To: Gwyn Koepke/NA/Enron@Enron
cc: David Port/Market Risk/Corp/Enron@ENRON, Rudi Zipter/HOU/ECT@ECT, Frank 
Economou/NA/Enron@Enron 

Subject: South Korea curve: FX and inflation, dated 1/8/2001

Thank you for providing the South Korea curve.  Can you please provide a more 
detailed explanation regarding you assumptions to calculate the curve?  The 
SK-Enron team is interested in knowing your view points on the market.

Thanks again
Monica
---------------------- Forwarded by Monica Reasoner/HOU/ECT on 01/08/2001 
03:15 PM ---------------------------


Maureen Raymond@ENRON
01/08/2001 03:34 PM
Sent by: Gwyn Koepke@ENRON
To: Monica Reasoner/HOU/ECT@ECT
cc: Cindy Hudler/HOU/ECT@ECT, Pushkar Shahi/ENRON@enronxgate 
Subject: South Korea curve: FX and inflation, dated 1/8/2001

Monica,

Please find attached an updated forward curve for the Korean won and 
inflation for 20 years dated as of 1/8/01.  

Gwyn Koepke for
Maureen Raymond-Castaneda