South Korea's financial authorities launched an emergency market review after the KOSPI plunged more than 7%, deepening uncertainty in the local stock market. Regulators said they will respond firmly to any market-disrupting activity that could amplify volatility under a zero-tolerance policy, and will swiftly implement contingency plans if necessary.
The Financial Services Commission (FSC) said it held an emergency meeting on stock market conditions on the 15th at the Government Complex Seoul, chaired by FSC Chairman Lee Eok-won, with the Financial Supervisory Service, the Korea Exchange and other related agencies as well as market experts. Participants reviewed recent trends in the domestic stock market amid growing external uncertainty, along with supply-and-demand conditions among foreign and institutional investors, and discussed how to respond going forward.
The agencies and market experts pointed to expectations of rising global interest rates, uncertainty over investment and earnings prospects in the artificial intelligence chip sector, and higher international oil prices as the reasons behind the increased volatility. They assessed, however, that the pace of the domestic market's decline and the supply-and-demand reaction had been excessive. Key Korean industries such as semiconductors, defense and shipbuilding are posting solid earnings, they said, and the economy's fundamentals — including foreign exchange reserves, the current account balance and the soundness of financial institutions — remain firm.
Participants agreed that while vigilance over rising volatility should be maintained, the spread of excessive anxiety and abrupt herding should be guarded against. Investors also need to make rational decisions based on companies' intrinsic value and medium- to long-term growth potential, they said. The financial authorities said they will closely monitor domestic and overseas market trends and supply-and-demand conditions with related agencies, and will respond firmly to market-disrupting activity such as price manipulation and illegal short selling that can emerge during periods of market instability.
"Stay alert even to small swings in volatility and take active steps to ensure financial market stability and investor protection," FSC Chairman Lee Eok-won said. "Investing on excessive debt and credit is dangerous, and risk management matters all the more at times like these. Financial firms should refrain from indiscriminate credit extension and make every effort on customer protection and risk management."