Deputy Prime Minister Hong Nam-ki presided over the meeting on current financial markets, held on August 7, an emergency gathering where the Bank of Korea Governor and the heads of Korea's two financial regulators, Financial Services Commission and Financial Supervisory Service, participated. The participants pledged close cooperation to avoid sudden volatility.
The following is a summary of DPM Hong's keynote address.
Current financial markets
The current volatility in the financial market was due to a number of risks posed upon us for a short period of time. Rising concerns over a global economic slowdown, uncertainties about Fed's rate cuts, US announcement of putting an additional tariff on Chinese goods, sudden devaluation of the yuan, and US designation of China as a currency manipulator. Global stock markets have been suffering amid escalating US-China trade tensions.
Internally, exports have been falling and investment has yet to recover. Japan's trade controls will add difficulties to Korea's manufacturing, which has been suffering low earnings.
However, we should not be too anxious. Korea's external soundness is strongest in history with record-high FX reserves and foreign net lending of more than US $400 billion. Korea's economic fundamentals remain strong despite difficulties at home and abroad according to international credit agencies. This was proved by the overseas sales of sovereign debt last June, as well as the sales of corporate bonds. There have been steady inflows of foreign capital into Korea's stock market.
Government to prime the pump
The government will thoroughly monitor the market situation, and respond timely and effectively according to the contingency plans which include measures to bolster demand in the stock market, such as allowing stock buybacks and tightening short-selling rules. With regard to the FX market, the government will work to avoid herd insect.
We will work hard to help exports, as well as investment, recover in the second half: 75 percent of the supplementary budget, passed last week, will be spent in August and September, and the government will work on difficulties in carrying out projects, whether they are private or public, by addressing problems faced by each and every project.
We will continue to call on Japan to retreat its trade restrictions, implementing short-term measures to minimize corporate damage, as well as long-term measures to strengthen industrial competitiveness.
Soure: Ministry of Strategy and Finance