| Bang Ki-sun, deputy minister of economy and finance, speaks during an inter-government meeting with related officials at the Korea Federation of Banks headquarters in Seoul, Tuesday. / Courtesy of Ministry of Economy and Finance |
KOSPI loses 1.5%; won rebounds to 1,214.5
By Jhoo Dong-chan
The government has vowed to take stern measures to stabilize the nation's financial market if volatility continues to increase, signaling a possible intervention in the currency market.
It also said it has mapped out a contingency plan to curb market unrest, including temporarily suspending "shorting" in the nation's stock market.
The government's move followed Washington's decision to designate China as a currency manipulator, Monday, which sent a shudder through both domestic and global financial markets.
On Washington's decision, the Dow Jones Industrial Average dropped by 767.27 points, or 2.9 percent, to close at 25,717.74.
On the overnight plunge on Wall Street, the benchmark KOSPI closed at 1,917.5, down 29.48 points Tuesday, or 1.51 percent, from the previous session. The tech-heavy Kosdaq also dipped 18.29 points, or 3.21 percent, to 551.50 on the day.
The Nikkei 225 also slid 13.498 points, or 0.65 percent, to 20,585.31 from the previous session.
Seoul convened a joint meeting Tuesday morning with officials from related government agencies, including the Ministry of Economy and Finance, the Ministry of Trade, Industry and Energy and the Bank of Korea, to discuss the issue.
Deputy Finance Minister Bang Ki-sun first expressed his confidence in the nation's economy during the meeting.
"Global uncertainties are mounting due to Washington's decision to label China as a currency manipulator, but Korea's economy is solid enough to withstand such external factors," he said.
"The nation's foreign exchange reserve currently stood at the all-time figure of about $400 billion. It is still maintaining the highest credit grades from foreign ratings agencies. It is no time to panic."
Bang said, however, the government will closely monitor the nation's stock and foreign exchange markets, and if necessary, it will intervene to settle the volatility.
"We will take steps in a swift and drastic manner to stabilize financial markets under a contingency plan in case of sharp volatility," he said.
Financial Services Commission Vice Chairman Sohn Byung-doo said during the agency's in-house conference that the agency will review its options to temporarily restrict short-selling if the current market fluctuations continue.
"Short selling has its own function contributing to the market, but we will review our options to temporarily limit shorting here in case of emergency," Sohn said during the meeting.
The government's prompt move settled the won-dollar exchange rate at 1,215.3 won per dollar, unchanged from the previous day.
"Seoul stocks are very weak at the moment, but this is a global trend surfacing after the renewed trade tension between the U.S. and China," said Lee Chang-mok, managing director of NH Investment & Securities' Research Center Division.
Samsung Securities Research Center head Oh Hyun-seok agreed.
"We should wait and see how Beijing comes up with its financial countermeasures," Oh said. "It is still unclear at this point whether unfavorable factors are expanding over mounting global uncertainties. Rather, this could be an opportunity for investors to buy at cheaper prices. For foreigners, undervalued Seoul stocks could be an opportunity."