South Korea’s central bank head said his international counterparts mostly agreed the end of the US Federal Reserve’s stimulus would not spark a major crisis, although some emerging nations would suffer “difficulties.”
Bank of Korea Governor Kim Choong-soo’s comments come as foreigners flee developing countries such as India, Indonesia and Brazil, which had seen a huge investment splurge thanks to the vast US monetary easing.
The withdrawal of the huge sums of cash has seen emerging market stocks and currencies tumble in recent weeks.
“When the reduction in liquidity starts, some markets that have deviated from market principles will become targets,” Kim told a group of economists from foreign investment banks in Seoul after returning from a central bankers’ annual get-together in Jackson Hole, Wyoming.
“No major crisis is expected, but there was some talk about the possibility of some countries undergoing difficulties,” he said without elaborating.
Kim also said South Korea’s economy was viewed by participants at Jackson Hole as faring relatively well, compared with other emerging nations.
Meanwhile, South Korean President Park Geun-hye called on the heads of the country’s biggest industrial companies to increase investment and promised she would prevent regulations from obstructing their business activities.
Park met yesterday with Lee Kun-hee of Samsung Group, Chung Mong-koo of Hyundai Motor Co and the heads of eight other large industrial groups, according to an e-mailed statement from the president’s office.
Park said she sees signs of an economic recovery and told the executives that “aggressive and pre-emptive investment” has increased corporate competitiveness and helped improve the national economy in the past, according to the e-mail.
Huh Chang-soo, head of GS Group, acknowledged investment by the top 30 conglomerates in the country fell short of their initial plan and told Park that they would increase investment to 6 trillion won (US$5.4 billion) to 155 trillion won this year, according to the statement.
The government also announced steps to support the property market.
It will cut home-purchase taxes and increase the supply of cheap loans, according to an e-mailed statement yesterday from five departments, including the finance ministry. Other measures include adding to rental housing and tax breaks on rental expenses for low-income households.