FSC: Low likelihood of a sustained stock-market downtrend… vows to crack down on market disruptions

Financial authorities hold emergency meeting to review financial-market conditions

Lee Eok-won: Key is stabilizing markets and minimizing spillovers to the real economy

With the war between the United States and Iran intensifying and volatility rising in South Korea’s stock market, the Financial Services Commission (FSC) held an emergency market review meeting to discuss response measures.

The FSC said it convened a “Emergency Financial Market Conditions Review Meeting” at 3 p.m. on the 4th, chaired by FSC Chairman Lee Eok-won, via videoconference with the Financial Supervisory Service (FSS) and financial-market experts. Attendees included a standing commissioner of the FSC’s Securities and Futures Commission, the head of the Financial Policy Bureau, and the FSS senior deputy governor, along with Kim Dong-won, head of the Research Center at KB Securities; Han Ji-young, researcher at Kiwoom Securities; Lee Bo-mi, head of the Capital Markets Research Office at the Korea Institute of Finance; and Kang So-hyun, head of the Capital Markets Office at the Korea Capital Market Institute, as financial-market experts.

The meeting came after volatility in domestic financial markets rapidly increased following developments in the Middle East, including the KOSPI falling more than 12% in a single day and the won-dollar exchange rate rising by more than 39 won from the end of last month as of the morning. The three-year Korean Treasury yield also rose 14.3 bp over the same period (1 bp = 0.01% point).

Participants assessed that the recent rise in equity-market volatility reflected a combination of heightened Middle East-related geopolitical risks and profit-taking after the market’s strong gains. They also agreed, however, that the likelihood of a “sustained downtrend” is low, as upward momentum remains intact, supported by improving corporate earnings, expectations for capital-market revitalization policies, and continued fund inflows into capital markets.

Chairman Lee added that authorities will closely monitor market-disrupting behavior and the spread of fake news exploiting heightened volatility, and will deal strictly under a zero-tolerance principle when such cases are detected. He also instructed that, should excessive volatility emerge, the government would actively deploy the currently operating market-stabilization program worth 100 trillion won + α.

Furthermore, to support companies affected by the Middle East situation, the FSC said it will supply new funds through financial support programs totaling 13.3 trillion won—provided by the Korea Development Bank (8 trillion won), the Industrial Bank of Korea (2.3 trillion won), and the Korea Credit Guarantee Fund (3 trillion won)—and will minimize corporate liquidity strains by extending maturities in full for one year on existing loans and guarantees.

He also instructed that staff in charge of the related work be granted immediate immunity in cases without intent or gross negligence. This mirrors the approach taken during the Russia-Ukraine crisis in March 2022.

The FSC said it will continue operating a 24-hour monitoring system, sharing developments in the Middle East closely with relevant agencies through its “Financial Markets Task Force” until markets stabilize.

Jin Young-gi, Hankyung.com reporter young71@hankyung.com