"While there could still be companies falling into trouble
individually, we can deal with them with targeted measures, but
in general, I don't see the real estate market-related problems
will cause a broader systemic risk," Bang said.
The three-month commercial paper yield had soared
by more than 200 basis points (bps) in a few weeks from just
above 3% in late September last year on concerns about possible
debt defaults by property developers.
The government, along with the financial regulator and
central bank, has since stepped in with a series of aid
programmes and the yield has fallen retreated by more than 100
bps in several weeks.
Regarding the won's rapid gain of more than 15% over the
past three months, Bang played down its impact on exports,
saying the country's exporters now compete with their brand
power and quality rather than prices.
"Korea's export structure has been changing toward relying
more on quality competitiveness, and so, we should make more
efforts to that direction," Bang said, while explaining the
reduced impact of the foreign exchange rate on exports.
(Reporting by Choonsik Yoo and Yena Park; Additional reporting
by Jihoon Lee; Editing by Lincoln Feast and Kim Coghill)
(Adds direct quote on exports)
By Choonsik Yoo and Yena Park
SEOUL, Feb 9 (Reuters) - South Korea's plans to loosen
restrictions in its currency market will raise the won's status
globally and boost business opportunities for local financial
firms, a vice finance minister told Reuters on Thursday.
The new measures, unveiled earlier this week, call for more
than doubling the trading hours for the won until past midnight
local time and allowing qualified global financial firms to
directly trade the currency through two onshore spot brokerage
houses.
Vice Minister Bang Ki-sun said the government was working on
follow-up measures with the aim of implementing the plans in
July next year, while dismissing concerns the moves could make
the won more volatile.
"We are not fully allowing the won to be freely traded
outside the country but just make it more convertible," Bang
told Reuters in an interview, adding the government would still
maintain its oversight over the financial institutions trading
the won.
South Korea has grown to one of the world's top 10 economies
in just a few decades but has kept a tight grip on its currency
market, mainly out of the trauma from its near sovereign default
in the late 1990s during the Asia financial crisis.
South Korea's economy contracted in the December quarter but
Bang said the most recent information indicated it would return
to growth in the January-March period, without providing
specific data.
He said there was no meaningful factor seen behind massive
foreign fund outflows in the past two consecutive months from
local bond market, other than the fact there was a large amount
of bonds coming to maturity during the period.
RISKS FROM REAL ESTATE MARKET SLUMP
Bang also said there was almost no danger of South Korea's
cooling real estate market causing a systemic risk to the larger
financial system, noting policy measures have succeeded in
diffusing money market strains related to property projects.
House prices in South Korea fell 1.98% in December from a
month earlier, the fastest drop since data releases began in
late 2003 and a seventh consecutive month of decline.
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