Roadshow considered to boost Kospi after fallFinance Minister Kim Dong-yeon on Tuesday said the government could go on an international roadshow or increase local share purchases by public institutions to stabilize Korean stock prices.
“We are currently monitoring the situation and will present a contingency plan if the recent decline continues,” Kim said.
Stock prices on Tuesday recovered from Monday’s drop, with the Kospi gaining 18.64 points, or 0.93 percent, to close at 2,014.69. It was the first time in six trading days that the index settled above 2,010.
On Monday, retail investors joined foreign investors in selling, taking the benchmark below the 2,000 level for the first time in nearly two years.
Retail and foreign investors remained net sellers on Tuesday.
Retail investors for the second consecutive day sold more than 350 billion won ($307 million) worth of stocks, while foreign investors offloaded 183.4 billion won. Foreign investors have been net sellers for nine consecutive days.
Institutional investors were net buyers, purchasing more than 520 billion won worth of shares and helping the Kospi bounce back after five trading days of bearish sentiment.
“Institutional investors largely led by public pension funds bought shares whose value has fallen,” said Kim Seong-hwan, a Bookook Securities analyst.
“We have contingency plans for each and every scenario,” Finance Minister Kim said Tuesday. However, “we shouldn’t act too lightly.”
On Monday, during the National Assembly’s annual audit hearing, Kim denied that the market is in a state of panic.
“We are closely monitoring the market 24 hours a day,” Kim told lawmakers. However, “it is not appropriate to make hasty decisions over the stock market.”
When asked whether the government would consider abolishing or lowering taxes applied to stock trades, Kim said the government could lose 2 trillion won for every 0.1 percentage points the tax is lowered. Although the authorities may look into the adjustment, the measure wouldn’t be right at this point, he added. The government collected 6.3 trillion won in stock exchange taxes last year.
The Democratic Party has been pushing to lower the tax rate from the current 0.5 percent to 0.1 percent in order to encourage more retail participation in the market. Other government institutions worked to calm the markets.
Financial Services Commission (FSC) Chairman Choi Jong-ku stressed in an emergency meeting Tuesday that Korea’s macroeconomic indicators, including the current account, remain strong and Korean company profit forecasts are encouraging.
“[The recent volatility in the market] is the result of the normalization of monetary policies in other countries, the intensifying trade conflict [between the United States and China] and worries over the slowing global economy,” Choi said.
The FSC on Monday announced the investment of 500 billion won into shares as early as next month in an effort to stabilize the market.
The Bank of Korea has released a report saying it is confident fundamentals are strong, adding that the bond and foreign exchange markets are relatively stable.
BY LEE HO-JEONG [email@example.com]