About 'Open Mike in Busan'
This week I’m going to talk about my job. I’m a financial trader, and I work for myself.
I read recently that seven out of ten Korean people regretted changing their jobs. Clearly there’s a lot of stress here connected with people’s working lives. It’s the same in England. In fact, there’s a word for it in English – we call it the “rat-race”, and it’s a race many people dream about dropping out of. There’s a book about trading by Alexander Elder, which begins with these words: “You can be free. You can live and work anywhere in the world. You can be independent from routine and not answer to anybody. This is the life of a successful trader.” It’s a good opening because it speaks to the dream of freedom and independence people have.
Job stress and the desire for a better life on fairer terms are big issues in modern society, and it’s part of the reason I quit my job working for a company. I think a lot of Korean people can understand the motivation. And as far as trading is concerned, it seems there’s quite a lot of it happening here.
I was both surprised and appalled to find out how much some Korean people were trading the financial markets. You know, I found out they call Korean traders ‘ants’, and I guess that sums all of us up. When I came to Korea in 2006 – before the Credit Crisis – everyone was talking about their investments, or their funds (‘pundue’), if they left the job to the bank. The percentage gains were enormous – I heard stories of people making 20-30% per year. This is scary... and unsustainable. They’re the kind of gains you usually see before a crash. But even before people lost so much money in the Credit Crisis – I saw TV stories here, and heard stories from my extended Korean social network, of people losing tens of thousands of dollars (or tens of millions of won) in the stock market.
Korean trading TV channels
You can tell it’s a serious business because of the dedicated Korean TV channels aimed at these ‘ants’. We don’t have those kind of TV channels in England. We have Bloomberg, which is a sorry excuse for a financial channel [In the hour running up to the London market opening, Bloomberg UK runs a heavy mix of adverts and sports/entertainment stories to the detriment of reporting on the morning’s corporate news releases]. The Korean channels feature lots of charts and chat-feeds like Twitter with viewer commentary. It’s intense stuff, it’s what trading is really about [sadly], and I think there might be three Korean channels just like this.
Financial trading in Korea
The market here – and the way people trade – seems to be different to England. There’s a lot of actual real stock buying, which means betting on upwards movements only, although there are also Equity-Linked Warrants (ELW) which are quite popular [if it’s anything like ‘covered warrants’ in Europe the deck is probably, by design, heavily stacked against the trader]. It’s easy to look clever in a bull-market with products like this.
I buy and sell financial contracts. In theory, it’s the difference between the price now and the price at some future point in time [but unlike most warrants, they don’t carry exponentially volatile expiry dates]. Think of it as the theoretical ownership of shares in a company, but you never actually own the stock. I might hold these financial contracts for weeks, minutes or even sometimes seconds. I also bet on downwards movements in the things I trade – which is called ‘short-selling’ or ‘shorting’. Overall, it’s not a term I’m fond of, but I suppose you could class me as a ‘daytrader’.
Trade what you know
I don’t trade any Korean companies. When I lived in England, I used to trade the UK and the US primarily, but I can’t really trade the US any more because of the time difference.
The problem with trading Korean companies is mostly the language barrier [although I suspect market liquidity isn’t as great either]. If I used a Korean securities company (or ‘broker’), even if I can overcome the Korean language interface – or they offer one in English – I can’t understand the news. I have to understand what’s happening with what I’m trading [another school of thought in the community differs on this point]. Anyway, as things stand, with my brokers and trading systems, I have no access to the Korean market. I’m not exactly sure why this is – I have access to many other global markets including Japan – but historically I think there have been lots of restrictive laws in Korea which make the whole business rather difficult.
The fn Hub
Of course, Korea has its ‘Financial Hub’ project – or ‘fn Hub’ as they [bizarrely] call it [or as I call it, ‘another fn hub’]. The fn Hub wants to create an environment where “domestic and foreign companies can compete freely (and thrive together)”.
One of the reasons London has been successful as a financial centre is that there is little regulation there. But here there are barriers – for example in foreign banks taking over domestic ones. The Financial Investment Services and Capital Markets Act 2009 broke down some of the regulatory barriers, but the government is still talking about whether to allow hedge funds to operate here – hedge funds [rightly or wrongly] are a fundamental part of the modern system in London and New York.
So some companies can’t operate here, even if they want to. Of the contracts I trade, which include stocks, commodities and currencies, none of my currency brokers will let me have an account in Korea, because of the Korean financial and banking rules. And I understand the difficulties, because my bank – [fn] HSBC – which is a global bank advertising a ‘global account’, doesn’t allow online UK to Korea money transfers. It all has to be done by phone. [I found this important fact out after they’d convinced me to open an account on the basis I could do my global banking over the Internet – which given I specified I wanted it for Korea, they should have known was impossible].
So with HSBC – and other banks I suppose – I can’t bring money into Korea electronically, or move it out. So, no electronic movement of money. I think I understand why this is – it’s probably a legacy of the 1997 Asian Financial Crisis, which created a fear that money moving in and out quickly could lead to a rapid economic collapse. But restrictions are the enemy of capitalism. I’m not ethically justifying this kind of global capitalism – it’s responsible for lots of problems in the world like the Credit Crisis. But it’s the way things are. Modern global capitalism means the free movement of capital, money in other words.
Korea as an ‘Asian Financial Hub’
I think the government here is trying to head in the right direction, and working sincerely towards their goal of making South Korea an ‘Asian Financial Hub’. But clearly it’s slow progress, and I think people have to be realistic about this idea. Look at what you’ve got right now – Singapore and Hong Kong are financial centres of sorts because they use English [for business at least]. Japan is a major financial market because of its financial power and the financial infrastructure it built up as part of that. You get the impression with the ‘fn Hub’ that it’s being talked about as some kind of replacement for these other financial centres. But what’s Korea’s unique selling point?
I don’t see that Korea will ever be the kind of Asian Financial Hub they are dreaming of. First of all, politics is a problem I’m afraid. Can you persuade companies to come here when this country is regularly threatened by an aggressive neighbour? Then there’s the language barrier and the anti-foreign rhetoric which private hate groups and the government regularly engage in [the latest is that apparently Ulleung Island could be 'militarily threatened' by Japan, in addition to the 'foreigners are spreading AIDS' political issue which I've previously mentioned. It's not that Japan is necessarily any less xenophobic of course - but they already have a financial hub whereas the government in Korea is trying to attract foreigners in to build one up].
No more hubs
But the bigger issue might be the whole idea of financial hubs and international financial centres in the first place. These days markets are consolidating, becoming increasingly electronic-only and speed of execution is an issue [high-frequency trading]. In the past, financial traders had to be near where the action was, but increasingly you put your computers there (or actually at the geographical mid-point between two markets) and you sit somewhere else. If anything, one day, there might be no financial hubs of any kind.
Don’t try this at home
I wouldn’t recommend trading as a job. In fact, I wouldn’t recommend it to my worst enemy. Longer term investing can be sensible, although nobody knows what the future is going to bring.
Inside Out Busan
Air date: 2011-04-13 @ ~19:30