By Kim Tae-jong
Financial Services Commission (FSC) Chairman Kim Seok-dong said Friday that Korea has enough ammunition to cushion any blow from outside if market volatility caused by the eurozone crisis turns uglier.
“We have already prepared various measures for the financial market to deal with the Greek crisis,” Kim said during a conference hosted by the Institute for Global Economics at the Westin Chosun Hotel in Seoul.
The remarks came as local stock prices and the value of the won fell drastically this week due to renewed fears over another economic crisis as Greece may leave the eurozone and this is leading to a gloomy forecast for the global economy.
Regarding mounting concerns over the Korean economy, Kim asked people to “trust” the government, adding it will immediately take necessary steps when the financial market is affected.
Contrary to his confidence, the Korea Composite Stock Price Index (KOSPI) that day dropped 3.4 percent, sinking further below the psychologically-important 1,800 mark to end at 1782.46, the lowest mark in the past five months.
Due to foreign capital flight, the value of the won also fell to 1,172.80 against the dollar, also the lowest level for five months.
Asked about measures to cope with a situation where Greece leaves the eurozone, Kim said the financial authorities are now working on various possibilities.
But he expects that Korea will be least affected by the eurozone crisis, while it will take a long time for Europe to get out of trouble.
“Last year, we conducted savings bank restructuring and secured foreign currencies at a stable level, and overall, we have strengthened the soundness of financial organizations, which will help minimize the impact of the eurozone crisis,” Kim said.
He also downplayed the problem of an outflow of foreign capital, which accounts for about 30 percent of the stock market’s valuation, saying it is not at a worrisome level.
“Foreigners are withdrawing investments in the stock market due to financial issues. We check the dollar reserves every day, but at the moment there is no big problem and we have secured enough,” he said.
According to the Korea Exchange, offshore investors pulled out of the market for the 13th consecutive session, dumping about 1.3 trillion won worth of shares this week.