South Korean Regulator Commits to Preventing Real Estate Financing RisksSeoul Stock Market Suffers Decline in Late Morning Trading

SEOUL—The Financial Supervisory Service (FSS) of South Korea has pledged to implement measures to prevent the spillover of real estate project financing (PF) risks into the broader financial markets, as stated by the FSS governor Lee Bok-hyun on Monday. Lee emphasized the importance of persuading financial institutions to proactively manage credit risks associated with real estate PF loans, describing these risks as a potential "detonator" for the South Korean economy.

According to Yonhap News Agency, the regulator is focused on encouraging financial companies to enhance their loss-absorption capacities in relation to PF loans. Lee also issued a warning regarding severe consequences for financial institutions that fail to adequately address risks or neglect their responsibilities. This announcement comes in the wake of increased concerns over real estate project financing, particularly after the significant builder Taeyoung Engineering and Construction Co. applied for a debt restructuring program late last year. The FSS highlighted a concerning rise in the delinquency rate on PF loans, which more than doubled to 2.42 percent by the end of September, up from 1.19 percent at the end of 2022.

SEOUL—The South Korean stock market experienced a significant downturn in late Monday morning trading, as investors began selling off shares to capitalize on recent gains. The Korea Composite Stock Price Index (KOSPI) saw a decline of 38.63 points, dropping 1.48 percent to 2,576.68 by 11:20 a.m. Leading the downturn were major chipmakers, with Samsung Electronics, the world's largest semiconductor manufacturer, falling 1.73 percent and SK hynix, its competitor, decreasing by 0.96 percent.

According to Yonhap News Agency, other key industry players also saw declines in their share prices. Kia, the nation's second-largest automaker, dropped 1.92 percent, while its affiliate Hyundai Mobis decreased by 1.51 percent. Furthermore, leading battery manufacturer Samsung SDI saw a 1.02 percent fall, and SK Innovation, the top oil refiner, experienced a 1.53 percent reduction in its share price. Concurrently, the South Korean won depreciated against the U.S. dollar, trading at 1,337.1 won, a decline of 14.5 won from the previous session's close.

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