SEOUL– South Korea plans to implement measures to stabilize the market in a timely manner if needed as market volatility has increased amid external economic risks, a senior government official said Thursday.
First Vice Finance Minister Lee Eog-weon said the Korean financial market has been “excessively” volatile in recent sessions despite the country’s strong macroeconomic fundamentals.
South Korea’s benchmark stock index, the KOSPI, nosedived nearly 2 percent and the Korean currency fell to a 14-month low against the U.S. dollar Wednesday over the debt crises of Chinese property developers and the impasse in the U.S. Congress on raising the debt limit.
The KOSPI rebounded Thursday on bargain hunting. The stock index closed at 2,959.46, up 51.15 points or 1.76 percent from the previous session. The local currency ended at 1,190.40 won per the greenback, up 1.90 won from Wednesday.
“There is a possibility that the global and local financial markets could see an additional increase in fluctuations, depending on how external economic risks play out,” Lee said at a government meeting on the economy and market.
“But given its fundamentals, the Korean market has shown somewhat excessive response,” he said.
The official said the government will closely monitor the financial market as uncertainty from external economic risks lingers, and take actions to stabilize it when needed.
Concerns about rising global inflation and uncertainty over the Federal Reserve’s tapering of bond purchases have weighed on market sentiments. There also remains caution among market players over the scheduled payment of bond interests by the debt-ridden Chinese Evergrande Group.
The finance ministry said the won’s latest fall appeared to be affected by demand and supply factors rather than by external economic risks.
It said foreign investors’ stock sell-offs mainly centered on chipmakers, dismissing the view that foreigners are reducing exposure to the local stock due to doubts about Korea’s economic fundamentals.
Despite increased market volatility, South Korea has successfully sold about US$1.3 billion worth of foreign exchange stabilization bonds at the second-lowest ever rates amid solid demand.
The country’s debt risk premium has mostly remained at the lowest level since the 2008-09 global financial crisis as the economy is currently recovering faster from the pandemic, according to the finance ministry.
Source: Yonhap News Agency