November 19, 2011

KOREA: For Aging South Koreans, an Offer of  Indonesian Debt

JAKARTA, Indonesia / The Jakarta Globe / Business / November 18, 2011

By Jiyeun Lee


SEOUL. Mirae Asset Securities and Tong Yang Securities will sell Indonesian debt to individual South Koreans, predicting there will be strong demand from older investors for higher-yielding bonds.

Mirae Asset will start selling the securities by the end of this year, said Lee Kwan-soon, head of Tong Yang’s customer asset management team.

Tong Yang plans to sell the debt by the end of the year, after having sold Brazilian bonds earlier this year, said Lee Jung-min, a general manager in the company’s product planning.

“We studied Japan and found that the elderly increased investment in higher-yielding overseas debt as they prepared for retirement after Japan’s yields dropped,” Mirae’s Lee said.

Illustrative photo of small and medium businessman: Park Jin-hyo, owner of a tofu store in Seoul Courtesy: Korea.net

“Our main target is Koreans aged between 40 and 70, those who have residual funds and are attracted by monthly interest payments which are like salaries.”

Indonesia’s five-year government bonds yielded 5.63 percent on Thursday, 212 basis points more than similar-maturity South Korean debt, Bloomberg data show.

The Southeast Asian nation’s debt returned 19.2 percent this year, the region’s best performance among 10 Asian countries tracked by HSBC Holdings.


The number of South Koreans aged from 40 to 69 increased 81 percent from 10.4 million in 1990 to 18.8 million in 2010, according to United Nations data.

Indonesia has higher debt yields, a currency that moves in a similar fashion to South Korea’s won and a stable economy, said Tong Yang’s Lee.

Seventy-three percent of investors who bought Brazilian debt from Tong Yang as of the end of September were over 40, and invested an average of 66 million won ($58,000) each in the securities, Lee said.

Indonesia’s rupiah and the won both weakened 2.3 percent against the dollar this month, Bloomberg data shows.

South Korea’s baby boomers, born after the Korean War ended in 1953, will start to reduce consumption and increase investment in fixed-income assets to prepare for retirement, said Hong Jung-hye, a Seoul-based fixed-income analyst at Shinyoung Securities, in a report earlier this month.

Bloomberg

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