Government: "Market stabilization measures in case of exchange rate imbalance... Strengthening designation system for overheated short-selling stocks" (Comprehensive)

Macroeconomic Financial Meeting on the 10th
"Significant Difference from Past Global Liquidity Crisis Situations"

[Asia Economy Reporter Jang Sehee] The government announced that it will strengthen the designation system for short-selling overheated stocks and implement additional market stabilization measures if necessary, in response to the increased volatility in the financial market caused by the novel coronavirus infection (COVID-19).

On the 10th, Kim Yong-beom, First Vice Minister of the Ministry of Economy and Finance, held a macroeconomic and financial meeting at the Seoul Banking Hall and said, "We will immediately implement the strengthened designation system for short-selling overheated stocks, and will swiftly and decisively carry out additional market stabilization measures as needed depending on future market conditions."

He also emphasized, "If the one-sided skewing of the exchange rate expands due to speculative trading riding on market anxiety, we will take timely market stabilization measures."

Regarding concerns about a global pandemic raised by some quarters, he mentioned, "Although the fluctuations in some market indices are somewhat excessive, there is no need to harbor fear or anxiety that it might escalate into a systemic crisis."

He explained, "There is a significant difference from past global liquidity crisis situations in that this shock did not start from a sudden deterioration of vulnerabilities and imbalances inherent in the financial system."

Vice Minister Kim further diagnosed, "The won-dollar exchange rate has generally become more volatile, exceeding 1,200 won due to the worsening domestic and international COVID-19 situation and the sharp drop in international oil prices."

He analyzed, "The background behind the Dow Jones Industrial Average, which recorded an all-time high just 13 days ago, plunging 19.3% in such a short period, along with the sharp rise in long-term interest rates, oil prices, and the volatility (VIX) index, can be summarized in several factors: the rapid spread and unpredictable nature of COVID-19 are factors increasing global market uncertainty."

He added, "Concerns are also spreading that the negative effects of COVID-19 on the global real economy will be deeper and longer-lasting than initially expected, and factors causing a rapid readjustment of global asset prices, which had been overvalued for a long time relative to fundamentals, are also at play."

Finally, Vice Minister Kim expressed, "The government will prioritize quarantine and securing public safety above all else under the recognition that there is no economy without quarantine."