December 27, 1997 in Nation/World

New Money Calms Korean Markets Emergency Loans Fuel Stock Market Rebound

Associated Press
 

In a suddenly crowded stock trading parlor in downtown Seoul, trader Lee Kyu-chul made what is these days a striking decision in South Korea: he invested his savings in the stock market.

He wasn’t the only one. Badly battered South Korean markets surged Friday after the International Monetary Fund and the Group of Seven countries agreed on $10 billion emergency loans to Seoul.

“I bet it is the right time to buy,” Lee said, looking at the wide trading board full of lights showing shares moving up. “This is my last bet.”

After months of declining markets in South Korea, Friday was a day for bettors. Advancing shares overwhelmed decliners 682 to 226. As many as 571 issues rose to their daily limit highs.

The sharp turnaround was fueled by an agreement by the IMF and the G-7 countries early Thursday to provide South Korea with emergency loans by early January.

Minutes after the Korea Stock Exchange opened, its benchmark index spiked up in active trading. The index remained high throughout the day and closed at 375.15 points, up 6.7 percent, or 23.7 points from Wednesday’s close.

The Korean currency, the won, also started sharply up at 1,400 against the U.S. dollar and closed the day at 1,498, which compared with 1,836 on Wednesday.

Korean investment funds traded on the New York Stock Exchange also gained ground Friday.

Hopeful signs also came from Tokyo, where 10 leading Japanese banks said they would consider measures to maintain the liquidity of South Korean foreign reserves.

Later Friday, MBC-TV in Seoul reported that one of the Japanese banks, Tokyo-Mitsubishi, agreed to roll over $600 million due Monday to several South Korean banks.

The report could not be confirmed independently.

“The pressure is now on for (lenders) to roll over anyway because the short-term problem is the only one that’s been solved,” said Kevin Harris, an international economist at MCM Currencywatch in New York.

“Through the course of next year, Korea has to do some very fancy juggling and make some very painful decisions in order to meet some obligations through the rest of the year,” he said.

The new rescue money - $2 billion from the IMF and $8 billion from the United States, Japan and five other industrialized countries - already had been committed to South Korea as part of a record $57 billion bailout package negotiated early this month.

Pressed by the need to curb spreading fears that the world’s 11th-largest economy, with rapidly dwindling foreign reserves, may crumble, the IMF and the G-7 countries decided to provide the money far ahead of schedule.

“Fears of a national moratorium have disappeared in the market. This could be the beginning of a rapid market recovery,” said Baek Junghyun, an analyst at Samsung Securities Co.

© Copyright 1997 Associated Press. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.


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