Bankers and traders went on a white-knuckle ride in South Korea last month. But this time North Korea and the war in Iraq couldn't take all the blame.
The country was rocked by an accounting scandal. SK Global, the trading arm of the SK Group, the country's third-largest chaebol (conglomerate) was accused of inflating profits by W1.56 trillion ($1.2 billion) and hiding bank obligations of W1.1 trillion. SK Group's chairman, Son Kil Seung, and 10 other executives were indicted. The Kospi index dropped to a 17-month low, making it the region's worst-performing bourse over the year and bond spreads blew out by between 50 and 80 basis points.
Then, just as the markets attempted to claw back losses, two other corporates came under scrutiny. Hyundai Merchant Marine was accused of massaging numbers and trying to hide W300 billion of loans from Korea Development Bank. And the Financial Supervisory Service is investigating allegations of inflated profits at the Hanwha Group. In addition the chairman of Posco, the country's largest steel producer, resigned. Yoo Sang-Boo is to face charges because of alleged share manipulation and spending W800 million of company money to buy and furnish a luxury flat for himself.