Finance minister urges calm in market turmoil

SEOUL, Aug. 10 (Yonhap) -- South Korea's finance minister said Wednesday that the government needs to stay coolheaded in coping with increased market volatility sparked by the downgrade of the U.S. credit rating.
At a weekly meeting of senior economic policymakers, Bahk Jae-wan said the government must make efforts to guard against intangible fears and overreaction to the latest developments and urged market actors to carefully examine objective data before making any decision.
"It is inevitable that a relatively small, open market economy like South Korea will be rocked by global market volatility, but actual developments taking place in the country can only be construed as being excessive," he claimed.
South Korea's stock marked crashed the past two days on the heels of the decision by Standard and Poor's Ratings Services (S&P) to cut its credit rating of U.S. government bonds to "AA+" from a sterling "AAA" late last week.
Concerns have also arisen that the country's exports will be hurt by a drop-off in overseas demand that could hurt economic growth.
The policymaker pointed out that the latest crisis stemmed directly from controversy surrounding U.S. debt and S&P's downgrade, but also from broader concerns of a slowdown in the U.S. economy and unfolding fiscal problems in Europe.
He did stress, however, that having experienced the Asian financial breakdown in the late 1990s and the more recent global financial crisis caused by the collapse of Lehman Brothers, South Korea has taken consistent steps to reduce exposure of its financial and foreign reserve sectors.
"Overall, the ability of the country to respond to emergency situations has improved considerably compared to the past," Bahk said, adding that 335,000 more jobs were created in July compared to the year before and that exports and other economic indicators were all showing good signs.
In addition, he said that the overnight decision by the U.S. Federal Open Market Committee (FOMC) to take active steps to stabilize financial market uncertainties must be taken into account.
Both the U.S. and European stock markets have rebounded in the latest trading sessions influenced by the FOMC's move to soothe market jitters.