Finance minister concerned about 'excessive' volatility, but trusts fundamentals

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Finance minister concerned about 'excessive' volatility, but trusts fundamentals

Published: 10 Dec. 2024, 17:15 Updated: 10 Dec. 2024, 19:05

JIN EUN-SOO
[email protected]

Audio report: written by reporters, read by AI

Finance Minister Choi Sang-mok speaks during the F4 meeting in central Seoul on Tuesday. [MINISTRY OF ECONOMY AND FINANCE]

Korea's Finance Minister and Deputy Prime Minister Choi Sang-mok expressed concern over the volatility in the country's stock and foreign exchange markets, which have fluctuated dramatically since last week's brief martial law declaration.

"The volatility in Korea’s financial and foreign exchange markets has increased recently, but considering the solid fundamentals and external stability of the economy, this seems excessive," Choi said in an emergency meeting on macroeconomic and financial issues, known as the F4 meeting, on Tuesday morning.

The F4 meeting, attended by Choi, Bank of Korea (BOK) Gov. Rhee Chang-yong, Financial Services Commission (FSC) Chairman Kim Byoung-hwan and Financial Supervisory Service (FSS) Gov. Lee Bok-hyun among others, have been held every day except for one since the martial law debacle.

"The government and the BOK have sufficient capacity to respond. We plan to actively address excessive market volatility to a degree that can reverse market sentiment," Choi said.

The Ministry of Economy and Finance stated that Korea's foreign exchange reserves stood at $415.4 billion as of September, ranking ninth in the world and that the country's net foreign assets came to $977.8 billion won as of the same month.

Choi emphasized the importance of institutional investors in weathering the market volatility.

"Continuous purchasing by institutional investors and bargain buying from foreign investors is apparent," he said.

"Institutional investors like pensions and funds should continue to play a responsible role."

The country's efforts to mitigate the economic fallout from the political turmoil have intensified, following days of unsettled stock and foreign exchange markets.

The FSS governor met with global investment banks including Morgan Stanley, UBS, Citibank, BNP Paribas, JP Morgan and HSBC on Tuesday to offer assurances on the country's strong financial fundamentals and encourage continued investment.

"We will do our best to minimize the impacts of the latest political uncertainties on our economy and financial markets," Gov. Lee said, adding that reform plans for Korea's capital market such as a revision to the Capital Markets Act would proceed.

"Please play an active role in ensuring that foreign investors can proceed with their originally planned investments, trusting in the robust fundamentals of our economy," Lee told the analysts at the global investment banks.

FSC Chair Kim echoed the same view in a meeting with 20 global financial companies on the same day.

Bank of Korea Gov. Rhee Chang-yong speaks to reporters after attending an emergency F4 meeting on Dec. 4, a day after martial law was briefly declared in Korea. [NEWS1]

The stock market has been battered by the heightened uncertainty stemming from the political turmoil.

The main Kospi bourse dropped below 2,400 Monday, closing at 2,360.58 — a decline of 2.8 percent — to mark a one-year low since Nov. 2, 2023.

It managed to rebound on Tuesday, closing at 2,417.84, up 2.43 percent.

The value of the local currency also strengthened against the greenback, closing at 1,427.1 won on Tuesday, narrowing the gap from the previous trading day's 1,437 won.

The government on Monday pledged to inject 100 billion won ($70 million) into the market through the Value-up fund designed to mitigate the undervaluation of local stocks by next week to stabilize volatility, followed by additional 300 billion won afterward.

BY JIN EUN-SOO [[email protected]]