By Yoon Ja-young
Staff Reporter
A senior government official warned that the stock market has risen too fast lately and retail investors may suffer losses if stocks undergo a major correction.
``Investors need to be more prudent in investment as stocks could turn highly volatile in short-term market gyrations,'' Vice Finance and Economy Minister Kim Seok-dong said at a regular press briefing.
His remarks are the latest in a series of warnings from government officials against steep gains in stock prices. The benchmark KOSPI has gained about 36 percent since the turn of the year on ample liquidity and growing hopes of economic recovery.
``The pace of gains in our stock market is a bit faster than those of other international markets,'' Kim said.
He said that market participants' concern about recent rise in interest rate and too fast a rise in stock prices began to be factored into share prices, referring to a modest correction over the last couple of sessions.
The government will keep monitoring the markets and oversee the amount of money that retail investors borrow from brokerages, he said.
He voiced concerns about high liquidity growth, one of the main reasons for the recent stock market surge.
``The government is keeping a close eye on the fact that the liquidity has continued to grow sharply," Kim said.
The senior official said the government is concerned about the won's steep gains against the dollar and other currencies.
The won has appreciated nearly 9 percent against the dollar in 2006 and gained more than 1 percent since the beginning of the year.
``The won's gain has been too fast,'' Kim said. ``We'll stick to our principle that we will take appropriate measures if such steps are necessary to stabilize the currency market.''
Kim said that the government will take additional steps against rising short-term overseas loans if countermeasures announced last week fail to curb the rise in short-term foreign loans.
``If short-term foreign debt continues to rise, we will come up with additional measures,'' Kim said.