By Kang Seung-woo
The nation’s finance minister stressed the need for international cooperation Tuesday to deal with the fallout from the global financial turmoil in the United States and Europe.
He was followed by the chief of the financial regulator, who called the investor response in the local financial markets, particularly the Seoul Bureau, too much.
“The market especially dislikes uncertainties,” Strategy and Finance Minister Bahk Jae-wan said at a regular meeting of economic ministers.
“The uncertainties have been amped up, as last week’s U.S. downgrade in Standard and Poor’s credit rating was added to the lingering jitters over the U.S. slowdown and the eurozone’s debt crisis.”
His remarks come as Asia’s fourth-largest economy has been hit hard by fears of a possible U.S. double-dip recession and Europe’s debt crisis, with the Korea Composite Stock Price Index (KOSPI) losing more than 10 percent to fall below 1,900 points during the last five trading sessions, sparked by foreign investors’ selloffs.
“To prevent uncertainties about the global economy at an early date, there is a need to strengthen international cooperation, along with efforts by individual countries,” Bahk said.
While the global financial markets including Wall Street, whose Dow Jones Industrial Average closed down 634 points, or 5.5 percent, on Monday, the Group of 20 issued a joint statement, affirming a commitment to take all necessary initiatives in a coordinated way to stabilize financial markets.
Despite the crisis, the finance minister stands against nationalistic moves, saying “Protectionist measures can be poison for the global economy. Countries must reject protectionism and intensify international cooperation to secure global economic stability that will work as a public good.”
Meanwhile, Financial Services Commission (FSC) Chairman Kim Seok-dong met heads of local brokerages and asset management firms the same day to calm financial market instability.
“The Korean economy remains healthy in terms of its foreign reserves, external debt structure and soundness of financial institutions,” Kim said.
“But, the market has overreacted to the current situation.”
He added that Korea went through the global financial crisis in 2008 smoothly and stocks have rebounded since then.
“As the local market is wide open to foreign investors thanks to sufficient liquidity, short-term shocks were felt. But it is not desirable for investors to worry about them immoderately because fundamentally, Korea’s financial system is sound,” Kim said.
He also asked financial firms to beef up their roles in the markets in an effort to protect loss-prone private investors, given that the markets are heavy with foreign capital, which usually scrambles to exit Korea in case of the current situation.
“The financial watchdog plans to closely monitor foreign currency liquidity situations at local financial firms and take appropriate actions with proper timing,” he said.
In a related move, the FSC and Financial Supervisory Service (FSS), the organization’s executive arm, held an emergency meeting Tuesday to stabilize the local financial markets, urging market players to remain calm.
“We will draw up necessary market-stabilizing steps after monitoring financial market situations,” said an official of the FSS.