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S. Korea views Dubai's impact on local markets as 'limited'
SEOUL, Nov. 29 (Yonhap) -- The impact of Dubai's ongoing debt problem on South Korea's financial markets will be marginal but it should be closely monitored to stave off a possible market turmoil, a South Korean official said Sunday.
"We think that the overall impact of the Dubai debt problem on the global economy and financial system is not that significant given the extent of drops reported in the U.S. stock markets," Yoon Jong-won, head of the finance ministry's economic policy bureau, told Yonhap News Agency in a telephone interview. "Especially, the impact on the Korean markets will be very limited."
His remarks come after a Dubai firm called for a six-month repayment moratorium on billions of dollars in debt Wednesday, raising fears it could trigger yet another global financial crisis after the collapse of Lehman Brothers last year.
South Korea's financial markets were severely rattled, with its stock index plunging and the local currency losing marked ground against the U.S. dollar last week as investors sought safer assets amid increased uncertainty.
The benchmark Korea Composite Stock Price Index dived 4.69 percent on Friday, a much bigger tumble compared with a 1.48 percent fall in the Dow Jones Industrial Average.
Yoon forecast that the South Korean market will stabilize "soon" as its setback on Friday was mainly due to psychological factors. But he added that the government will pay a close watch on the market to brace for the worst case scenario in which the crisis in the Middle East could develop into a global turbulence.
Yoon's views were broadly in line with other experts and government officials who see a limited impact on the local financial markets.
Kwon Hyouk-se, vice chairman of the Financial Services Commission, said that the nation's exposure to Dubai debts is "not big" and that the local financial markets and economy are in good shape to cushion its impact.
"It is a broad opinion that there is no chance that the crisis (in Dubai) could turn into a full-blown global system risk just as witnessed after the financial rout last year caused by the collapse of Lehman Brothers," Kwon said during a policy consultation meeting arranged Sunday afternoon to discuss countermeasures against the Dubai debt problem.
Kwon still noted that he will closely monitor market situations and brace for a possibility that it can turn into a worldwide financial instability as uncertainties still remain over global economic recovery.
kokobj@yna.co.kr
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