The level of South Korea's foreign reserves might not be sufficient enough to cope with a possible steep cross-border capital outflow sparked by external market volatility, experts said Monday.

According to data provided by the Bank of Korea, the finance ministry and the International Monetary Fund (IMF), South Korea held US$329.7 billion worth of foreign reserves as of end-July.

This is about 130 percent of what the IMF recommended for South Korea.

The ratio, however, is lower than those of other emerging countries, though its total amount of foreign reserves remains relatively higher. The corresponding figures for Indonesia and India stayed at 165 percent and 180 percent, respectively.

Despite such high levels of foreign reserve holdings, the two countries recently suffered steep capital outflows caused by worries that advanced countries might be scaling back their quantitative easing measures, experts said.

They said that South Korea continues to post a current account surplus and its fiscal health remains in good shape but expressed worries that its foreign reserves might not stay in what they view as "stable" levels considering its exposure to foreign capital.

"Following the 2008 global financial crisis, the additional amount of foreign capital flowing into South Korea's stock and bond markets came to about $300 billion," an expert said. "Though the overall foreign reserve holdings increased much over the past years, they are not enough to prepare for a possible steep outflow of foreign capital."

Foreign reserves consist of securities and deposits denominated in overseas currencies, along with IMF reserve positions, special drawing rights and gold bullion.

There are no internationally accepted rules for the levels of foreign reserves that a country should hold to protect itself from external market fluctuations.

The IMF customarily recommends the amount of foreign reserves for each country, which is asked to hold about 100-150 percent of what was recommended.

The government argues that its foreign reserve holdings remain within the IMF's recommended levels and that they are also sufficient enough to cope with market volatility. (Yonhap news)