S. Korean deputy finance minister outlines priorities

SEJONG: South Korea’s currency chief said yesterday that his top priority is managing risks to the country’s financial markets from rising tensions over North Korea, as the won slid to a six-week low.

Increasingly harsh exchanges between North Korea and the US have unnerved foreign investors in recent weeks, with both South Korea’s central bank and the finance ministry warning that further provocations could lead to sudden capital outflows.

“For now, managing risks (related to North Korea) and making sure that our sovereign credit rating stands unscathed are our top priorities,” deputy finance minister Hwang Kun-il told Reuters in Sejong, south of Seoul.

“Short-term, its difficult to expect markets to recover fast (from North Korea related jitters),” Hwang said, adding that his team will be on standby to provide policy responses to any escalations that occur over the long Chuseok holiday from Oct 2 through Oct 9, when local financial markets will be closed.

Foreign investors ended a sevenmonth long buying spree and turned into net sellers of South Korean bonds in August. The yield on three-year treasury bonds rose 25 basis points to 1.832% yesterday amid a multi-trillion won selloff this week.

They also unloaded 2.4 trillion won (RM8.9 billion) of South Korean stocks in August after buying 5.8 trillion won worth in July, data from the Financial Supervisory Service showed. The won closed at a six-week low yesterday.

Still, global rating agencies will not be adjusting their sovereign credit rating of South Korea anytime soon, Hwang said he confirmed recently, as their current rating of Asia’s fourth largest economy already reflects risks related to North Korean provocations.

Hwang said the finance ministry has “detailed” contingency plans in place for various risk scenarios, but added he could not disclose specifics of policy responses now. – Reuters