Korea’s Lee touts 100 trillion won emergency fund after volatility
He says the fund is to ensure the avoidance of ‘temporary abnormalities, but not force price adjustments’
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[SEOUL] South Korea’s President Lee Jae-myung highlighted the nation’s 100 trillion won (S$86.9 billion) market-stabilisation programme on Thursday (Mar 5), as Seoul grappled with historic volatility tied to the escalating conflict in Iran.
The benchmark Kospi index surged as much as 12 per cent on that day, the biggest intraday gain since October 2008.
This was after it sank by about the same amount the day before in a roller-coaster week linked to a global sell-off, as Middle East tensions spurred a flight from risk assets.
At a Cabinet meeting, he instructed officials to manage the market-stabilisation programme “appropriately and swiftly to rule out any instabilities in the money market”.
He emphasised that the government would not intervene directly to support the stock markets. “We are not supporting the equity index directly,” he said.
The fund is to ensure the avoidance of “temporary abnormalities, but not force price adjustments”, he added.
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The fund, which remains in place during normal periods, can be tapped by the authorities in times of stress. It was last deployed in 2022 during a debt crisis linked to South Korea’s Legoland development.
The programme announced on Thursday includes a credit market-stabilisation fund to support corporate bonds, in addition to dedicated capital aimed at helping ensure a soft landing for real-estate project financing.
Financial Services Commission chairman Lee Eog-weon said on Thursday that the government would increase the size of the fund if necessary.
Officials have repeatedly referenced the fund as a backstop, following record losses in domestic equities for the first week of March.
At one point, the won weakened to levels last seen during the global financial crisis.
Still, Lee said the stock market was moving toward normalisation.
“It’s about properly reforming the economic system and eliminating market unfairness,” he said. “Korea’s stock market being undervalued is a given fact, and it is going through a normalisation process.” BLOOMBERG
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