Seoul on alert over Hong Kong protest
The nation’s financial regulators are keeping a close eye on Hong Kong as the intensifying protest in Asia’s financial hub has been regarded as another threat to the Korean financial market and economy.
Although regulators said there is a slim chance of the political crisis affecting the Korean market negatively, they vowed to monitor possible fluctuations amid growing uncertainties worldwide.
According to the Financial Services Commission (FSC), Vice Chairman Sohn Byung-doo ordered agency officials Friday to re-check the contingency plan so they can take market stabilization measures immediately in case of emergency.
The Financial Supervisory Service (FSS), which the FSC oversees, also held a meeting Friday to check the risk factors that could affect the domestic financial market.
According to the financial watchdog, First Senior Deputy Governor Yoo Kwang-yeol ordered agency executives to be on alert and keep an eye on global issues.
“The geopolitical risk has been growing in Hong Kong,” an FSS official said.
“Hong Kong is Asia’s financial hub, so the recent crisis there may disrupt the global financial market. If the matter gets worse, the real economy will be affected negatively, because the U.S-China trade talks may go adrift.”
The FSS, however, said the Korean financial market is not at risk.
“Domestic financial companies’ exposure to Hong Kong is not big,” the FSS official said. “Those who invested in Hong Kong equity-linked securities (ELS) are unlikely to lose their money.”
The agency’s data showed domestic financial companies’ exposure to Hong Kong in March was $6.11 billion, 2.2 percent of their total external exposure.
“The Hang Seng China Enterprises Index and the Hang Seng Index dropped 2.7 percent and 2.2 percent respectively from the end of 2018,” the FSS official said. “The drop is not big enough for investors to lose their money.”
Analysts said the entire Asian economy would be shocked if Beijing sent troops to Hong Kong.
“The U.S.-China trade talks would be suspended in the case of Chinese military intervention,” HI Investment & Securities analyst Park Sang-hyun said in a recent report.
“If Hong Kong becomes the second Tiananmen, China will face both political and economic risks.”