S. Korea to boost dollar supply to ease economic pressures
Finance ministry, central bank moves expected to inject US$5 b to US$10b into the market
SEOUL: South Korea said yesterday it would inject more dollars into its banking system to ensure businesses have enough funding, amid concerns about the deepening global economic impact of the coronavirus pandemic.
The finance ministry and the Bank of Korea announced moves that are expected to beef up dollar supply in the market by US$5 billion to US$10 billion (RM4.18 billion to RM43.6 billion), as the coronavirus causes chaos in global financial markets and a scramble for US dollars.
Authorities will raise a cap on foreign currency forward positions for local banks to 50% of their equity capital from the current 40% starting today. For foreign banks, the ceiling will be relaxed to 250% from 200%.
South Korean policymakers have unveiled a string of measures in recent days, including an emergency interest rate cut and an extra 11.7 trillion won (RM40.66 billion) budget, in a bid to reduce pressure on Asia’s fourth-largest economy and keep its financial system operating normally.
The health crisis has soured business and consumer confidence and disrupted manufacturing, with Samsung Electronics and Hyundai
Motor temporarily closing plants after a worker tested positive.
And, though the number of new virus cases is declining domestically, they continue to soar internationally, raising fears of a global recession.
"We're in a very grave situation on both aspects of disease prevention and the economy", President Moon Jae-in told a meeting with economic policymakers.
"The economy is more worrisome, and the people's livelihood ... the problem is it is difficult to overcome the crisis on our own.”
Samsung Electronics’ annual general meeting yesterday drew a crowd of only about 400 shareholders this year, sharply down from about 1,000 last year.
Investors were scanned with thermal cameras and checked with thermometers as they arrived, and sat two seats away from each other as part of measures to ensure the meeting could go ahead safely.
Samsung Electronics also adopted electronic voting for the meeting and encouraged shareholders to cast votes online.
Meanwhile, South Korean shares tumbled nearly 5% yesterday to hit their lowest close since May 2010 as fears over the rapid spread of the coronavirus and its fallout on the global economy eclipsed the global stimulus packages. The won fell while the benchmark bond yield rose.
The Kospi closed down 81.24 points, or 4.86%, to 1,591.20, marking the biggest daily fall since November 2011 and the sixth straight losing streak.
The benchmark index lost a combined 19% during the six sessions, the worst sell-off since late October 2008, while it has declined 27.60% so far this year. – Reuters