[REPORTER'S DIARY]Stop Meddling in the MarketAt 8:30 a.m. on Tuesday, presidents of 38 securities companies gathered in the conference room of the Korea Securities Dealers Association building in Yeouido.
This was the third time that such a meeting had been held since Sept. 17. The purpose of the meeting was to deliver government policy, not to hold discussions. The recent meeting was no exception. Presidents of securities firms remained silent and listened to the government's view with no response.
The government made two announcements at the meeting.
First, Seoul said it would be up to the discretion of securities firms whether or not to keep their promise to only buy stocks and not sell them. The government had demanded that securities companies support the market immediately after the terrorist attacks in the United States, fearing the collapse of domestic stock markets. Companies that had not sold stocks for the past six days went on a selling binge immediately after the meeting. Stock prices, which rose more than 10 points early in the day, dropped more than 10 points after the meeting.
The government and the Korea Securities Dealers Association said, "Obtaining from securities firms a promise to only purchase stocks and not sell was an unavoidable measure to revive the investment climate struck by an unexpected outside impact."
Domestic institutional investors, including securities companies, make up only 10 percent of all investors now. Controlling them is not much help in stabilizing the stock market.
Again, only foreign investors, who are relatively free to make decisions on their investments, made profits in the troubled markets. Stock market analysts said the recent government measure caused nothing more than a distortion of the market.
The government once talked about raising a market stabilization fund, similar to the people's movement to collect gold when the foreign exchange crisis hit in late 1997. The fund was intended to appeal to patriotism and to revive the plummeting stock markets. Of course, the measure was quickly and hastily suggested after an order by President Kim Dae-jung on Sept. 18.
Most securities firms are doing nothing more than deploring such government measures. They said they understand the government's desire to prop up stock prices, but they seriously doubt it would work.
Analysts said in a collapsing stock market, investors likely would ignore the fund, which does not even provide tax benefits. Furthermore, under extremely difficult business conditions, the securities firms could not survive without earning profits from brokerage commissions, analysts said.
Most of all, private investors and securities firms would become entirely responsible for possible losses if stock markets plunge even after attracting investors with calls to rally around the flag.
"Maybe we should launch a campaign to ban unrealistic, inefficient and dictatorial stock market policies," a securities company worker said. That comment makes eminent sense.
The writer is a business news reporter of the JoongAng Ilbo.
by Kim Hyun-ki