Skip to comments.(News Focus) S. Korea raising alertness against influx of foreign capital
Posted on 09/23/2013 9:47:32 PM PDT by TexGrill
SEOUL, Sept. 24 (Yonhap) -- South Korea has not been affected by recent bouts of emerging market turmoil, but it is keeping close tabs on cross-border capital inflows as a possible sudden reversal of such funds will serve as a destabilizing factor for its economy.
The government is raising its alertness against volatile capital movements as the Federal Reserve's recent surprise decision to postpone tapering its stimulus bond purchases is feared to accelerate foreign capital inflows, which could put upward pressure on the local currency.
"Cross-border fund inflows are positive in the short term, but over the long haul, they could serve as a destabilizing factor for the Korean economy," a senior government official said. "We are closely monitoring the situation with a sense of increased caution."
Korea has differentiated itself from other emerging countries, including India and Indonesia, which have struggled to curb massive capital outflows and currency weakness as the Fed is mulling the timing of its stimulus cut.
Korea is highly sensitive to foreign capital flows as it underwent massive capital flights and subsequent currency depreciation whenever a financial crisis occurred. The won tumbled 25.7 percent against the U.S. dollar in 2008.
Since then, Korea has made efforts to raise shields against external shocks by boosting the foreign exchange reserve and drawing up a set of measures to curb excessive capital movements. The surplus run of the current account and a fall in short-term foreign debt are also serving as buffers against external funding risks.
Korea's stronger fundamentals helped prompt foreigners to chase Korean assets.
Foreign investors have snapped up Seoul stocks with their combined net buying reaching around 8.3 trillion won (US$7.9 billion) since Aug. 23.
(Excerpt) Read more at english.yonhapnews.co.kr ...
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