S. Korea going all-out to stabilize financial market, support virus-hit small firms

SEOUL, March 19 (Yonhap) -- South Korea on Thursday unveiled an unprecedented and bold support program designed to help calm local financial markets roiled by the spreading outbreak of the new coronavirus, also vowing additional support down the road if necessary. The financial support program, worth 50 trillion won (US$38.9 billion), centers around much needed support to small and medium-sized firms and people with low credit ratings, according to Finance Minister Hong Nam-ki. The government also plans to create a fund aimed at putting a floor under the falling stock market. "The (1997) Asian financial crisis affected Asia, and the (2008) financial crisis affected the financial sector, but the ongoing crisis is affecting the entire globe and all sectors," Hong said in a joint press conference that followed the first emergency economic council meeting chaired by President Moon Jae-in. "The difficulties in economic conditions and in securing funds are more serious to small businesses and self-employed people. Support for such vulnerable economic players is desperately needed until the market normalizes," he said of the reason for the country's largest-ever financial support package. Hong said the support package may also be expanded down the road depending on market conditions, noting the additional support may also include a second supplementary budget. The government has already secured 11.7 trillion won in extra budget to minimize economic fallout from COVID-19 outbreak and boost the country's economic growth. The government will also expand its purchase of corporate bonds to help local companies secure necessary funds in time. It will temporarily raise the cap on its primary collateralized bond obligations (P-CBOs) scheme to 6.7 trillion won for the next three years. "Someone has to play the role of circulating the fund by purchasing corporate bonds," Hong said. To this end, the government will also create a bond market stabilization fund, together with local financial institutions, according to Hong. A separate market stabilization fund of over 10 trillion won is also being sought for the stock market. The market support measures came as the local financial markets have been suffering extended losses under heavy selling by foreign investors. The benchmark Korea Composite Stock Price Index (KOSPI) has suffered losses for six consecutive sessions as of Wednesday. It again plunged more than 8 percent Thursday morning to reach the lowest point in more than a decade and trigger a temporary stock trading halt. Hong said the size of the bond and stock market stabilization funds will be decided later by the economic council. "Many crises that have faced our economy have come without warning, and looking back, we realize that the key to overcoming such crises was the joint efforts of the government, people and the private sector," Hong said. To allow local companies to find necessary funds, the government will provide 12 trillion won in special low-interest loans under its latest support program, according to Hong. Also, 8.5 trillion won of the total has been earmarked for special loans to people and businesses with low credit ratings. To help further ease financial burdens of local companies, a six-month extension on the maturity of loans extended to small and medium-sized firms will be expanded to all lenders, including insurance firms and non-banking lenders, the financial minister said. The move follows a stock market rout that began shortly after the World Health Organization declared the spread of COVID-19 a pandemic, causing major global stock markets to crash. bdk@yna.co.kr (END)