S. Korean financial authorities scramble to come up with stabilization measures

[Source: Korea Financial Investment Association]

The Korea Exchange (KRX) and the Korea Financial Investment Association (KOFIA) are holding a meeting to discuss measures to stabilize the plunging stock market after an unprecedented second 50-basis point hike by the Bank of Korea amid continued tensions between the U.S. and China as well as the protracted Russia-Ukraine war.

Korea Exchange Chairman Son Byung-doo and KOFIA Chairman Na Jae-chul embarked on a discussion on Tuesday afternoon to come up with measures such as separate taxation of dividend income to lift investor sentiment which has soured on the U.S. Federal Reserve’s aggressive tightening that led stock markets across the world to plummet.

The Kospi lost 26.65 percent this year as of Tuesday.

The financial investment industry is also struggling, with 58 securities firms posting 1.08 trillion won ($758.4 million) in net profit during the second quarter of this year, down 47.4 percent from 976.3 billion won during the first quarter. Third quarter earnings are expected to tumble further.

Chairman Na is also planning to hold discussions with Bank of Korea Governor Rhee Chang-yong soon to discuss market stabilization measures.

Measures such as banning short sales may be considered amid the domestic stock market losing nearly 633 trillion won in market value this year.

“Internal reviews are currently conducted on unfair trade practices that involve short selling,” said FSS chairman Lee Bok-hyun during a parliamentary inspection Tuesday.

The nation’s financial regulator partially lifted the complete ban on short selling for 200 large-cap firms listed on the main Kospi and 150 firms listed on the secondary Kosdaq in May last year.

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