The South Korean economy contracted by 4.3% in 1Q 09 (compared to growth of 3.4% in 4Q 08), having grown by only 2.5% in 2008 overall (compared to growth of 5.0% in 2007). While in May 2009 the Bank of Korea (BoK) forecast a decline of 2.4% in GDP during 2009, with the economy being hard hit by the unfolding financial crisis, the IMF took a bleaker view, forecasting a GDP fall of 4% in 2009 before a 1.5% rise in 2010....

Shinhan Financial Group’s (Shinhan) top- and bottom-lines fell y-o-y, with earnings suffering from a sharp rise in operating expenses. We remain concerned about the near term impact of the economic downturn in South Korea and ongoing volatility in financial markets. Considering these factors, as well as the company’s disappointing earnings, we maintain our 6-12 month HOLD rating. We will reassess our common stock rating for Shinhan in our next…

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The Shinhan Financial Group (Shinhan) common stock has depreciated significantly since our last update report, reflecting investor concerns over the economic downturn in South Korea. Media reports have also speculated that bank shares are suffering as a result of worries over South Korea’s foreign currency liquidity, following a sharp fall in the value of the won against the dollar in recent weeks. Although we remain concerned about…