Lee urges close cooperation with foreign governments
Seoul stocks rebounded in wobbly steps and advanced a tiny 0.27 percent to close at 1,806.24 Wednesday, tracking overnight recoveries in the U.S. and Europe on the Federal Reserve’s pledge to keep money flow cheap for the next two years.
The benchmark KOSPI gained almost 3 percent within the first five minutes of trading but dipped back to 1,800-level before it rattled up for a nearly flat close from Tuesday’s finish.
President Lee Myung-bak gestures during his unscheduled visit to the Finance Ministry in Gwacheon, south of Seoul, Wednesday. (Yonhap News)
The junior KOSDAQ moved in similar fashion but made a much higher gain of 4.77 percent to close at 453.55.
The local currency strengthened 0.74 percent to close at 1,080 won against the greenback, reversing earlier losses this week.
“It was a mixed market in large part because on one hand investors had some relief from the surge in the U.S. markets but institutional investors seemed disappointed by the no-change stance of the U.S. Fed,” Kim Chul-jung, a research fellow at Korea Investment & Securities said.
“Individual traders remained bargain hunters but foreign investors kept dumping shares,” he said right before the market closed. KOSPI lost nearly 17 percent since Aug. 1 on debt woes from the U.S. and Europe.
The U.S. Federal Reserve Chairman Ben Bernanke on Tuesday night local time said he plans to hold the interest rate near zero until at least mid-2013, giving some comfort for easy credit in the medium term. But more investors around the world are interpreting the signal as deterioration of outlook in the world’s most powerful economy, sparked by the historic cut of the U.S. debt rating by Standard & Poor’s from “AAA” to “AA+” over the weekend.
Although European markets overnight struggled to establish a clear trend, the news prompted the Dow Jones Industrial Average to surge more than 429 points, its 10th highest point gain in history, to close at 11,239.77.
President Lee Myung-bak made a surprise visit to the Finance Ministry in Gwacheon Government Complex an hour before market close to chair an emergency meeting.
“The fiscal crisis in the U.S. ultimately is a political problem, and a leadership issue. That has led to a fiscal crisis so building consensus and keeping things in harmony is important in the Korean government,” Lee said in the meeting.
“Governments around the world needs to closely cooperate to solve the problem.”
Attendees included Finance Minister Bahk Jae-wan, Bank of Korea Governor Kim Choong-soo, Financial Services Commission Chairman Kim Seok-dong, Financial Supervisory Services Governor Kwon Hyouk-se and chief economic policy advisers.
Bahk reiterated the economy’s strong fundamentals and urged investors to remain calm.
“Some turbulence caused by external shocks is unavoidable for a small and open economy like Korea but there is no need to overreact merely on fear,” Bahk said before beginning the weekly policy meeting earlier in the day.
“Investors need to make decisions based on objective information be rational about managing their money,” he added.
By Cynthia J. Kim (cynthiak@heraldcorp.com)
