Amid rising geopolitical tensions from US and Israel's military actions against Iran, South Korea's Kospi has fallen 12%, prompting financial authorities to reassure market participants about the stability of the financial markets.
The recent military actions by the US and Israel against Iran have sharply escalated geopolitical tensions in the Middle East, causing South Korea’s Kospi index to drop 12%, closing at 5,093.54. This decline, which equates to a drop of 698.37 points or 12.06% from the previous day's close, has raised concerns among investors. The Financial Services Commission (FSC), led by Chairman Lee Ok-keun, held an emergency meeting to discuss the market's fluctuation, reassuring participants that despite the current instability, a prolonged downward trend in the market is unlikely. The commission emphasized the importance of remaining calm and not succumbing to excessive anxiety over the situation.
During this meeting, financial experts and officials analyzed the causes behind the market decline, attributing it primarily to rising geopolitical risks linked to the situation in the Middle East and profit-taking following previous highs, rather than inherent weaknesses in the local economy. The FSC stated that there are still growth drivers for the Korean stock market, based on expectations for corporate earnings and policies to invigorate the capital market, indicating a potential for recovery instead of a continuous downturn. Participants underscored the necessity for rational judgment grounded in confidence in the economy and financial market, rather than reactionary fear.
The meeting also explored financial support measures for companies potentially affected by the escalating tensions in the Middle East. The government plans to mobilize a total of 13.3 trillion won through various institutions to support operational funds for impacted businesses. This financial backing will include extending the maturity of existing loans and guarantees by one year for affected companies. Furthermore, to ensure swift and smooth recovery from damages, employees involved in the extension of loans and guarantees will be safeguarded against liability for accidental issues, facilitated by the FSC's ongoing monitoring of the financial market until stability is restored.
