Unlock Editor’s Digest for free
Roula Khalaf, editor of the FT, picks her favorite stories in this weekly newsletter.
South Korean officials stepped in to shore up support for the country’s financial markets as investors braced for political uncertainty following President Yoon Suk Yeol’s failed attempt to impose a state of emergency.
Kim Byung-hwan, head of the country’s top financial regulator, said the government was ready to activate a Won10tn ($7.1 billion) stock market stabilization fund and a Won40tn bond market stabilization fund if needed.
“We will closely monitor the currency stability of financial institutions and respond to risks, such as margin calls caused by rising exchange rates, by ensuring foreign currency liquidity through securities financing,” Kim said in a statement.
Kim urged institutions like the stock market to focus on stabilizing investor sentiment. “Given the heightened market volatility, even small incidents can heighten anxiety,” he said.
His comments come in the middle increasingly calling for Yoon’s impeachment after his failed attempt to impose martial law sparked the country’s worst constitutional crisis in decades.
A successful impeachment of the opposition parties that control parliament would trigger early elections and prolong political uncertainty in Asia’s fourth-largest economy.
The country’s Kospi stock index fell 1.4 percent on Wednesday, while South Korea’s won gained 1.2 percent against the dollar.
Bond prices were mostly stable, and yields on two-year government debt rose by 0.12 percentage points. Yields on 10-year bonds rose by 0.01 percentage point, while yields on 30-year bonds remained unchanged. Bond yields move inversely with prices.
Shares of Samsung Electronics, South Korea’s most valuable listed company, fell 1.3 percent.
South Korean Finance Minister Choi Sang-mok said on Wednesday morning that the government would deploy “unlimited” liquidity to stabilize financial markets if needed, while the Bank of Korea’s monetary policy committee held an emergency meeting and said it was “keeping all options open until markets stabilize”.
The Central Bank expanded the scope of market operations by intensifying efforts to maintain liquidity and stability, increasing the number of securities eligible for open market operations.
It also started irregular repos to “broaden the short-term supply of liquidity” and increase the number of institutions eligible to trade repos.
