South Korean bank chiefs yesterday dismissed fears of a fresh credit crisis as jitters over their liquidity conditions shook financial markets.
The bank chiefs told Bank of Korea Governor Lee Seong-tae that they would have no difficulty in dollar funding and rolling over debt obligations, the central bank said in a statement.
The meeting came as the local currency plunged against the dollar yesterday, breaching the 1,500-won mark for the first time in three months.
The benchmark KOSPI index closed 3.7 percent lower yesterday on concerns about the weaker won and amid fears that banks would face a dollar shortage, dealers said. Market jitters deepened over a growing default risk in eastern European countries.
The KOSPI index ended down 41.15 points at 1,065.95, an 11-week low.
“The mix of liquidity concerns in local banks and foreign-currency debt problems in eastern Europe continued to rattle the local foreign exchange market, weighing on investor sentiment,” Lee Kyung-soo, an analyst at Taurus Investment and Securities, told Dow Jones Newswires.
The dollar ended at 1,506 won, near a three-month high.
Foreign investors, alarmed by the won’s sharp depreciation, offloaded a net 358.6 billion won of stocks, stretching their selling streak to a ninth consecutive day.
Banks were hit hard amid concerns over a global liquidity crunch and higher funding costs as the won weakened, analysts said. Shipbuilders also plunged because of concerns some overseas clients may scrap orders placed with major South Korean shipbuilders.
The index may test 1,000 in the coming week depending on US economic data, Lee Kyung-soo said.
Meanwhile the central bank said South Korea’s total foreign debt stood at US$380.5 billion at the end of last year.
This included the banking sector’s foreign debt of US$171.7 billion, down US$21.2 billion from a year earlier.