Government Meeting on Current Financial Markets
Government to Stay Prepared for Sudden Volatility
The Government Meeting on Current Financial Markets was held on August 6, in which officials from the Ministry of Economy and Finance, the Ministry of Trade, Industry and Energy, Financial Services Commission, Bank of Korea, Financial Supervisory Service and Korea Center for International Finance participated. Deputy Minister of Economy and Finance Bang Ki-sun and Deputy Minister for International Affairs Kim Hoe-jeong led the discussion. The meeting looked into the Korean and global financial market situations, and discussed how to best prepare for potential risks.
The following is a summary of Deputy Minister Bang’s keynote address.
Current financial markets
Stock markets worldwide fell yesterday: KOSPI fell 2.6 percent on August 5, and US stock markets lost around three percent. Volatility increased in FX markets, and the won weakened against the dollar by 17.3 won (0.4 percent).
The slides of Korean stocks and the won are due to the country’s weak exports and corporate earnings, as well as the sudden plunge of the yuan on August 5 and Japan’s trade restrictions. The US designation of China as being a currency manipulator will add uncertainties to the global economy.
Although volatility increases in Korea’s financial and FX markets in line with rising domestic and global uncertainties, the Korean economy is well prepared for it: External soundness indicators are stable with a record high level of FX reserves and net foreign lending, US $403.1 billion as of July (world’s 9th largest) and US $474.2 billion as of March, respectively. Furthermore, Korea successfully sold US $1.5 billion worth of sovereign debt on June 13, and has maintained best sovereign credit ratings in its history. Foreign investment continues to flow in Korea’s stock market, and the country’s CDS premiums have been low.
Government to stay alert and be prepared
The government will stay alert to market situations, and be well prepared for sudden volatility. We will have our contingency plans ready, and will take timely and effective measures to help markets stabilize.
The Korean government will continue to work to boost the economy, and implement the measures to support companies affected by Japan’s trade curbs, as well as to strengthen industrial competitiveness. We will do our utmost for the Korean economy to continue to grow steadily.