The South Korean government unveiled measures yesterday allowing it access to more details on the activities of foreign investors in a bid to reduce volatility in financial markets.
Until now, South Korean banks must report a daily change of money volume in financial investment accounts held by foreigners.
However, under a new rule to take effect in April, they will have to offer a detailed breakdown of the money flow by types of investment, such as stocks and bonds, the Bank of Korea and the South Korean Ministry of Finance said in a joint statement.
The change will allow Seoul financial authorities to better track capital flows of foreign investors and to respond to sudden volatility in markets — particularly stock markets — more quickly and effectively, the statement said.
“Since the global financial crisis, capital flows in foreigners’ stock trading have become far more volatile than before ... the change will help us monitor the money flows of foreign investors more closely,” it added.
The move came less than a week after the authorities announced a plan to lower the ceiling on foreign exchange forward positions by foreign and local banks in a bid to ease volatility in the currency market.
The Korean won has gained about 9 percent against the US dollar since May — a worrying trend for the country’s export-driven economy, which is already struggling with the impact of the downturn in its US and European markets.
Seoul fears that “hot money” coming into the country could exit just as swiftly — as it did during the East Asian financial crisis in 1997 and 1998, forcing the country to seek IMF aid, and during the 2008 global economic crisis.
Separately, South Korea’s inflation rate slowed to a three-month low last month, government data showed yesterday, allowing more room for the central bank to cut rates to bolster growth.
The consumer price index rose 1.6 percent from a year earlier, slowed by falling prices of telecommunications services and key items, including medicines and televisions, researcher Statistics Korea said.
Last month’s figure compared with a 2.1 percent gain the month before and is the lowest since a 1.2 percent increase in August.
It was well below the Bank of Korea’s inflation target of between 2 percent and 4 percent.
Core inflation, which excludes volatile energy and food prices, was 1.3 percent last month, a decrease of 1.5 percent from October.
Central bank policymakers are widely expected to leave the key interest rate unchanged at 2.75 percent in a meeting next week, after already trimming it twice so far this year.