On December 5, Deputy Prime Minister Choi Sang-mok held an Emergency Meeting on Macroeconomic and Financial Issues[1] at the Korea Federation of Banks building to examine the current status of financial and foreign exchange (FX) markets and discuss future response strategies.

Yesterday (December 4), the financial and FX markets showed increased volatility in the early part of the session. However, following the government’s announcement of market stabilization measures, the markets gained stability as the day progressed.

^* The KOSPI index saw a decline of more than 2% after opening, but it reduced the loss and closed down by 1.4%.

^* The opening USD/KRW exchange rate recorded at 1,418.1 KRW but gradually decreased, closing at 1,410.1 KRW (as of 3:30 PM).

The participants viewed that the recent situation has had a limited impact on the financial and FX markets so far; both the government and the BOK have sufficient capacity to respond to market volatility and as the international credit rating agency Standard & Poor’s (S&P) shared a view that there is no material impact on Korea’s sovereign rating, market participants should remain calm and respond rationally, rather than having excessive anxiety.

However, as the domestic situation could potentially amplify volatility when combined with the external uncertainties surrounding the inauguration of the new U.S. administration, they have agreed to meticulously monitor the market and take all necessary measures.

Until the market stabilizes, a new Economic and Financial Monitoring Task Force will be launched to enhance 24-hour monitoring of both the financial and real economy, and it will swiftly implement all measures to restore market stability according to contingency plans when necessary.

The government is preparing to implement market stabilization measures, including a stock market stabilization fund of up to 10 trillion won, which can be deployed immediately if needed, while managing the bond and money markets stably through the mobilization of a 40 trillion won bond market stabilization fund and programs to purchase corporate bonds and commercial papers (CPs). Moreover, the BOK will begin buying repurchase agreements (RPs) immediately to supply unlimited liquidity, while promptly implementing various market stabilization measures, including the outright purchase of government bonds and foreign-currency RP purchases, to ensure the provision of foreign currency liquidity.