Financial authorities launch 24-hour monitoring over Middle East risks: "100 trillion won market stabilization measures if needed"

[The Financial News] The financial authorities have activated an emergency 24-hour monitoring system in response to rising geopolitical uncertainty in the Middle East. With international oil prices and the exchange rate surging and concerns mounting over increased volatility in Korea's financial markets, they announced that, if necessary, they will immediately deploy a 100 trillion won market stabilization program and inject more than 13 trillion won into vulnerable companies.
On the 3rd, Lee Eog-weon, Chairperson of the Financial Services Commission, presided over a Joint Financial Market Situation Review Meeting at Government Complex Seoul with the Ministry of Economy and Finance, the Bank of Korea (BOK), the Financial Supervisory Service (FSS), the Korea Exchange (KRX), the Korea Center for International Finance (KCIF), and other relevant institutions. The meeting was convened to minimize the impact at market opening of the flight to safe assets and geopolitical risks that had already become evident in global markets.
According to the Financial Services Commission (FSC), global financial markets were rattled the previous day (local time) as Middle East risks were priced in. The price of West Texas Intermediate crude oil (WTI) soared 6.3% from the previous session, while traditional safe havens such as gold rose 1.2% and the U.S. dollar gained 0.9%.
Pressure is intensifying in the foreign exchange market. In the New York non-deliverable forward (NDF) market, the won–dollar rate closed at 1,466 won, up 26 won from the previous day. European equities, as measured by the Euro Stoxx index (-2.5%), and Japan’s Nikkei 225 (-1.4%) also ended sharply lower.
The government plans to activate its pre-arranged contingency plans if market volatility expands further. It is considering broader use of the market stabilization programs totaling "100 trillion won plus" that were set up to ensure a soft landing in the corporate bond and commercial paper (CP) markets and in real estate project financing (PF).
Lee stated, "The fundamentals of our economy remain solid, but unfair practices may occur by taking advantage of heightened anxiety." He instructed, "The Financial Supervisory Service and the Korea Exchange must work together to crack down on illegal activities in the capital market under a zero-tolerance policy."
Measures to cushion the real economy were also announced. A financial support program totaling 13.3 trillion won will be implemented for vulnerable small and mid-sized companies with a high share of exports to the Middle East.
The FSC plans to maintain round-the-clock monitoring through the Joint Financial Market Response Team of Relevant Authorities, headed by its Secretary General, until the situation stabilizes.
elikim@fnnews.com Kim Mi-hee Reporter