ID :
200099
Tue, 08/09/2011 - 13:00
Auther :
Shortlink :
https://oananews.org//node/200099
The shortlink copeid
Prepare for worst situation
(Yonhap Editorial)
SEOUL, Aug. 9 (Yonhap) -- The global financial market is tumbling out of fears of a dreaded double-dip recession in the U.S. economy on top of the financial crisis in Europe.
The New York Stock Exchange lost 5.5 percent on Monday. The Group of 20 leading economies pledged to take "all necessary initiatives" to support the world's financial stability, but it was not enough to soothe investors' fears about a potential global double-dip downturn.
Stock markets in Britain, Germany and France as well as in Asia crashed. There is a speculation that the credit ratings agency Standard and Poor's may make another lowering of the U.S. rating within three months.
The shockwave to the Korean market was also enormous. The benchmark Korea Composite Stock Price Index (KOSPI) has fallen more than 15 percent since Aug. 2, weighed down by fears about a double-dip recession.
The KOSPI crashed as much as 9.88 percent at one point in late morning trade, falling below the 1,700-point level. It tumbled 3.82 percent to a 10-month low of 1,869.45 on Monday on panic selling.
The local currency has depreciated to the dollar for the sixth straight session as global recovery woes revived investors' appetite for safe assets. The Korean won has lost about 3 percent to the greenback since Aug. 2
During the last three sessions, foreigners dumped their holdings amounting to nearly 3 trillion won on the local stock market.
The global financial turmoil following the downgrade of the U.S. credit rating may have a turning point on Tuesday (local time) when the the U.S. Federal Open Market Committee (FOMC), will hold a meeting.
The FOMC is expected to announce a new economic stimulus plan that could assuage market jitters but it is difficult to expect the U.S. economy will recover from the recession easily considering that the American financial crisis was stemmed from excessive financial deficits.
If the FOMC's measures cannot save the situation , the world's trust in the U.S. economy would suffer further.
If the U.S. and Europe fail to reduce their debts, it could trigger a protracted business recess like the one Japan has experienced.
The South Korean government does not expect the U.S. will fall into a double dip, and the recent market turmoil would have a limited impact on the local economy, given the country's sound fiscal status and large foreign reserves.
As the government's call for market participants to stay calm, excessive fears may not be desirable. However, the financial authorities should not take the situation with ease.
The authorities need to closely monitor the possibility of a credit crunch and the flow of short-term foreign borrowings. The government is urged to prepare for the worst situation.
SEOUL, Aug. 9 (Yonhap) -- The global financial market is tumbling out of fears of a dreaded double-dip recession in the U.S. economy on top of the financial crisis in Europe.
The New York Stock Exchange lost 5.5 percent on Monday. The Group of 20 leading economies pledged to take "all necessary initiatives" to support the world's financial stability, but it was not enough to soothe investors' fears about a potential global double-dip downturn.
Stock markets in Britain, Germany and France as well as in Asia crashed. There is a speculation that the credit ratings agency Standard and Poor's may make another lowering of the U.S. rating within three months.
The shockwave to the Korean market was also enormous. The benchmark Korea Composite Stock Price Index (KOSPI) has fallen more than 15 percent since Aug. 2, weighed down by fears about a double-dip recession.
The KOSPI crashed as much as 9.88 percent at one point in late morning trade, falling below the 1,700-point level. It tumbled 3.82 percent to a 10-month low of 1,869.45 on Monday on panic selling.
The local currency has depreciated to the dollar for the sixth straight session as global recovery woes revived investors' appetite for safe assets. The Korean won has lost about 3 percent to the greenback since Aug. 2
During the last three sessions, foreigners dumped their holdings amounting to nearly 3 trillion won on the local stock market.
The global financial turmoil following the downgrade of the U.S. credit rating may have a turning point on Tuesday (local time) when the the U.S. Federal Open Market Committee (FOMC), will hold a meeting.
The FOMC is expected to announce a new economic stimulus plan that could assuage market jitters but it is difficult to expect the U.S. economy will recover from the recession easily considering that the American financial crisis was stemmed from excessive financial deficits.
If the FOMC's measures cannot save the situation , the world's trust in the U.S. economy would suffer further.
If the U.S. and Europe fail to reduce their debts, it could trigger a protracted business recess like the one Japan has experienced.
The South Korean government does not expect the U.S. will fall into a double dip, and the recent market turmoil would have a limited impact on the local economy, given the country's sound fiscal status and large foreign reserves.
As the government's call for market participants to stay calm, excessive fears may not be desirable. However, the financial authorities should not take the situation with ease.
The authorities need to closely monitor the possibility of a credit crunch and the flow of short-term foreign borrowings. The government is urged to prepare for the worst situation.
