South Korea Financial Markets to Stabilize, Shin Says
Written on September 3, 2008
South Korea's currency, bond and stock markets will stabilize as investors' concerns that the nation is facing a financial crisis subside, said Deputy Finance Minister Shin Je Yoon.
The won has plunged 19 percent this year, Asia's worst performer, as accelerating inflation and a slowing economy prompted investment funds to move money out of the country. Foreigners became net sellers of Korean bonds in June and July for the first time this year, raising concern of further capital outflows as government debt matures this month.
The currency fell to 1,151.85 versus the dollar at 12:30 p.m. in Seoul and the Kospi index gained 1.2 percent to 1,423.62. Moody's Investors Service said yesterday South Korea's banks and companies are “much healthier'' than in 1997, when the nation was forced to turn to the International Monetary Fund for a $57 billion bailout and the won lost about half of its value.
“There's no need to worry because the situation is totally different from the 1997 financial crisis,'' Shin told reporters in Gwacheon today. South Korea is facing “difficulties'' but not a crisis, he said.
The nation's financial markets will calm after Sept. 9 to Sept. 10 when a series of government bonds mature, Shin said.
About $6.7 billion in government debt held by foreigners is set to mature this month, according to official figures payday loan cash advance loan. Shin said yesterday he expects overseas investors will reinvest some of their returns in South Korea.
No Crisis
“We don't believe in the much-hyped scenario of a September crisis,'' said Oh Suk Tae, an economist at Citigroup Inc. in Seoul. “The reported amount of foreign investors' bond holdings that will mature in September is simply too small to cause any meaningful crisis in Korea.''
Still, Oh said Korea's won may remain weak “for a considerable period'' amid a worsening global growth outlook and concern about dwindling foreign-exchange reserves.
The $970 billion economy grew 4.8 percent in the second quarter from a year earlier, the slowest pace in more than a year. South Korea posted the largest current-account deficit in six months in July.
“The current-account balance will improve from September,'' Shin said today. “And there's possibility supply and demand in the currency market will improve substantially in the medium-to-longer term.''
Filed in: business.