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(LEAD) S. Korea's economy to see little impact from U.S. subprime rout: vice finance minister
By Kim Joo-young
SEOUL, Sept. 19 (Yonhap) -- South Korea's vice finance minister on Wednesday reaffirmed the government stance that the U.S. subprime mortgage rout will have a limited impact on Asia's third-largest economy.
"A majority of experts agree that the U.S. subprime issue will not cause a financial system crisis or an economic recession," Lim Young-rok said in a speech at a forum in Seoul.
"Direct impact from the U.S. subprime problem on South Korea will be limited because local financial institutions have low exposure to the subprime market."
Stock market investors, however, could stay jittery in global financial markets for the time being as concerns spread over the U.S. housing market, Lim said.
"Investor unrest could linger for some time in global financial markets since the default rate on the house-backed loans is unlikely to decline soon."
Such investor jitters could cause increased fluctuations in markets with high foreign capital, including South Korea, he said.
On Tuesday, the U.S. Federal Reserve trimmed its benchmark rate by half a percentage point to 4.75 percent, a larger cut than analysts' expectations, in an effort to keep the housing market slump from derailing the economy.
The U.S. blue-chip Dow Jones industrial average rose 2.51 percent to 13,739.39, the highest advance since April 2003, as the Fed's rate cut gave investors hope that the housing and credit turmoil would not drag the economy down.
The benchmark stock index in Seoul breached above 1,900 early Wednesday, partly because of strong financial shares. The won rose by 4.7 won to 926 won to the U.S. dollar as of noon as the Fed decision spurred dollar-selling.
Lim eased concerns that the Fed decision may further fuel the local currency's appreciation.
The won has risen to trade at an average of 933.99 won to the greenback in the first half, up from 946.74 won the previous six months, according to the central bank data.
The won is forecast to average 928.9 won to the dollar in the second half of this year, the country's leading private think tank said early this week.
"Respecting the markets, we will manage our foreign currency policy in a market-friendly manner," Lim said. "We will also act against currency speculation and other fluctuations in the markets."
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