BOK chief sees more losses

Bank of Korea Governor Kim Choong-soo said major countries’ stock markets will continue to fall because many countries are “fixing unorthodox monetary policies.”

His remarks were made a day after Japan’s Nikkei fell 7.32 percent Thursday, the biggest drop since the 2011 earthquake and tsunami.

On Thursday, England and Germany’s stock markets dipped over 2 percent. China’s Shanghai Stock Exchange Composite Index shed 1.13 percent

“On Thursday, the Federal Reserve released the minutes of the latest Federal Open Market Committee meeting and Fed Chairman Ben Bernanke gave a speech and answered questions at the Senate and the House of Representatives .?.?. there was lots of information [that could affect stock markets],” Kim said in a meeting with investment bank executives yesterday. “He has mentioned an option of seeking an exit strategy while not selling mortgage-backed securities. This seems to be a big change of direction.”

Bernanke said the Fed could “take a step down in our pace of purchases” in the “next few meetings.”

“We’re trying to make an assessment of whether or not we have seen real and sustainable progress in the labor market outlook,” Bernanke told the Joint Economic Committee of Congress in Washington.

When Bernanke was asked whether the Fed would pull back on bond-buying before Labor Day on Sept. 2, he replied, “I don’t know. It’s going to depend on the data.”

Kim said Bernanke’s answer was subject to “all sorts of interpretation and this has made market actors think and take action.”

He said U.S. interest rates will have to rise sooner or later.

“It’s a matter of time for the U.S. and I believe interest rates there will bounce back,” Kim said.

When countries like England and Japan roll out exit strategies, Korea is likely to be affected, he said.

“What I worry about in the long run is when the euro zone, England and Japan start exit strategies,” Kim said. “These countries’ exit strategies won’t happen in a synchronized manner. If each country seeks an exit strategy in a sequenced manner, this will cause market volatility and the impact on us will be tough.”

Yesterday’s meeting was attended by executives of Bank of America-Merrill Lynch Securities, Samsung Securities, Daiwa Securities, UBS, JP Morgan Chase Bank and Nomura Securities.

Meanwhile, the Nikkei 225 Stock Average closed 0.9 percent higher at 14,612.45 yesterday after having “a roller coaster ride” of declining as much as 3.5 percent.

The benchmark of Korea’s blue chip Kospi gained 0.22 percent to close at 1,973.45 yesterday after losing 1.24 percent on Thursday.

The Shanghai Stock Exchange Composite Index closed at 2,286.76, up 0.5 percent.

By Kim Mi-ju [mijukim@joongang.co.kr]