FSC mulls market contingency plans

The government will actively cope with market uncertainties and beef up active monitoring of the financial market over growing worries about the global economy, the top financial regulator said Monday. 

Financial Services Commission chairman Yim Jong-yong said the government will implement contingency plans if investor sentiment excessively worsens and market conditions deteriorate.

“The government has already prepared a range of policy options such as emergency measures that aim to stabilize investor sentiments, and enhance the ability to buy stocks in case of an expansion of volatility in the local market,” Yim said during a market review meeting in Seoul. 

The move came as stocks in Asia’s fourth-largest economy jolted last week due to jittery investors who dumped shares, exposing growing fears over North Korea’s nuclear provocation, a plunge in Japanese equity market and China’s slowdown.

“We will take preemptive actions if needed after thoroughly inspecting financial firms’ external exposure to China and Hong Kong while checking on the soundness of banks and foreign currency liquidity,” he said.

Korean shares rebounded 1.47 percent to end at 1,862 points on Monday after last week’s sharp selloff.

The Korean stock market nosedived on the first two trading sessions after the Lunar New Year holiday on Thursday and Friday. The benchmark Korea Composite Stock Price Index plummeted more than 4.3 percent while the tech-heavy secondary bourse KOSDAQ tumbled a whopping nearly 11 percent. The circuit breaker was triggered and trading suspended for 20 minutes following an 8.2 percent plunge on Friday.

“It is hard to assure that the uncertainty of the global financial environment will be resolved in the short term. Each country’s financial market is unlikely to gain stability in early stages,” chairman Yim said.

On Monday, the mainland Chinese markets closed slightly lower, with the Shanghai composite falling 0.63 percent and the Shenzhen composite dropping 0.05 percent.

“The Chinese stock market is highly precarious as negative internal and external factors were reflected at once after the weeklong Spring Festival,” Yim said.

He urged investors to stay calm, saying that Korean stock market has a high potential to show an upward trend as its related indices such as price-to-book-value ratio are undervalued and the average range of daily drop is relatively small.

He also told heads of related bodies including the Financial Supervisory Service to aggressively take countermeasures for market stability while keeping an eye on popular derivatives-linked securities products tracking the Hong Kong index, which recently sparked serious concerns among Korean investors over growing financial volatility.

By Park Han-na (hnpark@heraldcorp.com)