The outflow of funds from South Korean equities in recent months due to turbulence in China's stock markets and ahead of the pending rate hike by the US Federal Reserve are "not alarming", said a regulatory official on Tuesday. "When we compare to previous outflow episodes, recent outflows have been ordinary," said Kim Yong-beom, standing commissioner at South Korea's Financial Services Commission in a press conference for foreign media.
Kim said $1 trillion to $1.5 trillion worth of shares had left Asia's fourth-largest economy on average each month over the past three months, less than the monthly $2 trillion to $2.5 trillion worth of outflows seen during the global financial crisis. "If outflows start becoming bigger than $2.5 trillion, I think we could start calling that out of the ordinary," he said.
Kim's comments came in response to turmoil in global markets that sent South Korean shares plummeting 5 percent last week. The commissioner said the pace of won weakness against the dollar isn't particularly worrisome. The won dropped 2 percent last week against the dollar due to worries over a sharp slowdown in China and geopolitical tensions between North and South Korea.
"I don't think the won will start weakening at a worrying pace and even the current fall is not due to reasons specific to South Korea," he said. Kim added the won's strength earlier in the year had put pressure on policy makers, but he said any concerns would be nullified as long as the local currency tracked its global peers. The South Korean economy is expected to rebound quickly after the current volatility subsides, the official said, noting the nation's strong current account surplus and foreign exchange reserves, which are the sixth largest in the world.
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