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(LEAD) S. Korea vows to thoroughly prepare for destabilizing factors

All News 10:32 December 20, 2018

(ATTN: UPDATES with more comments)

SEOUL, Dec. 20 (Yonhap) -- South Korea will make thorough preparations for any destabilizing factors after the U.S. raised interest rates, a senior official said Thursday.

Lee Ho-seung, the first vice minister of economy and finance, also said in a meeting with relevant officials in Seoul that a possible hike in market rates in South Korea is something that households and companies can cope with.

South Korea's overall household debt reached a record 1,514 trillion won (US$1.34 trillion) as of September.

He made the remarks after the U.S. Federal Reserve raised rates to a range of 2.25 percent to 2.50 percent, leaving the difference between Seoul and Washington's rates at wider 0.5-0.75 percentage point.

In November, the Bank of Korea raised its key rate by a quarter percentage point for the first time in a year to 1.75 percent.

A wider rate spread between the two countries has sparked concerns over possible foreign capital outflow from Korea, but foreigners have kept a net inflow of their funds into South Korea.

In the January-November period, foreigners bought a net 14.2 trillion won worth of South Korean bonds, while selling a net 6.8 trillion won worth of local stocks.

The net inflow of foreign funds showed "foreign investors' confidence" on South Korean economy, Lee said.

Lee also said he didn't expect any immediate foreign capital outflow from South Korea following the U.S. rate hike.

Currently, foreign investors own more than 30 percent of market capitalization of South Korea's benchmark KOSPI bourse.

Lee said South Korea will maintain round-the-clock monitoring of financial markets and risk factors while closely monitoring outflow of foreign funds from the South Korean financial market.

"We will firmly deal with (situations) under contingency plans if necessary," Lee said.

Vice finance minister Lee Ho-seung (L) speaks at a meeting of government policymakers in Seoul on Dec. 20, 2018. (Yonhap)


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