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President-elect's remarks fan South Korean crisis mood
Copyright ) 1997 Nando.net
Copyright ) 1997 Reuters
SEOUL (December 23, 1997 00:54 a.m. EST http://www.nando.net) -
Published comments by South Korean president-elect Kim Dae-jung that he
was "flabbergasted" by the seriousness of the country's financial crisis
renewed the sense of crisis in this beleaguered country on Tuesday.
Financial markets were unhinged by Kim's candid comments, quoted in
Tuesday's edition of the leading Chosun Ilbo newspaper.
A late-morning statement by a senior central Bank of Korea official did
little to soothe frayed nerves.
Stocks closed the morning session down nearly seven percent and the won
tumbled ever closer to the psychologically important level of 2,000
against the dollar.
The Chosun Ilbo quoted Kim as telling his party members on Monday: "We
don't know whether we would go bankrupt tomorrow or the day after
tomorrow. I can't sleep since I was briefed (about the financial
situation). I am totally flabbergasted."
Kim went on to say: "This is the bottom. It's a matter of one month, no,
even one day. I just can't understand how the situation came to this. I
can't help being angry."
"The government did this to our country," Kim said. From now on, "our
response to the crisis must be accurate and no single mistake must be
allowed."
He reiterated his commitment to implementing reforms mandated by the
International Monetary Fund (IMF), which earlier this month arranged a
record bail-out of South Korea's faltering economy totalling almost $60
billion.
Kim also said he had made a mistake when he suggested during the
campaign he would seek to renegotiate the IMF's conditions for the
rescue loans.
Kim's comments as quoted by the Chosun Ilbo were confirmed by the
vice-spokesman of the United Liberal Democrats, the party which earlier
this year formed a coalition with Kim's National Congress for New
Politics.
Kim won the presidency in a hard-fought election last week that marked
the first time a South Korean opposition party had won a presidential
contest.
Assistant central bank governor Lee Kang-nam tried to calm markets.
"Some news reports made the financial markets extremely unstable," Lee
told Reuters: "But given the current level of usable foreign currency
reserves and expected money inflows from the World Bank and the Asian
Development Bank, sovereign defaults will never happen."
Lee said several Japanese banks had agreed on Monday to roll over loans
to South Korean commercial banks, though it was unclear how long the
maturities had been extended.
He also said the central bank expected other foreign financial
institutions to roll over loans that would soon be due.
But the markets focused on Kim Dae-jung's comments.
Stocks closed at midday down 6.87 percent at 368.84 points, largely in
reaction to Kim's comments, brokers said.
"His comments were frank and have made investors nervous," said Park
Ki-pyong, a Hanyang Securities broker.
The won plunged against the dollar also because of Kim's remarks,
falling to an historic low of 1,995.0 before recovering to close for the
lunch break at 1,958.0, against Monday's close of 1,715.0 on Monday.
South Korea's currency has lost more than 50 percent of its value
against the dollar this year.
Dealers also blamed ratings downgrades by Moody's Investors Service and
Standard & Poor's (S&P) as a major factor behind the dollar's surge in
strength against the won.
After Moody's on Monday downgraded the foreign currency country ceiling
for bonds and bank deposits for Korea, S&P also cut Korea's long-term
and short-term foreign currency ratings.
The downgrades lowered South Korea's rating to junk bond from low
investment-grade status.
"The S&P news is really poison in the market," said a foreign bank
dealer. "It's only a matter of time for the dollar to reach 2,000
today."
Separately, foreign banks operating in South Korea have been discussing
rolling over loans to the nation's financial institutions and companies,
an official at a foreign bank said on Tuesday.
An official at a foreign bank told Reuters the foreign bankers' group
had agreed the country's crisis was serious.
"The country would face collapse if things go on like this," he said.
Meanwhile, the militant Korea Confederation of Trade Unions issued a
statement at a lunch rally in central Seoul saying it could not accept
any layoffs.
The union said it would stage rallies next month to prevent layoffs.
Kim Dae-jung said on Monday that layoffs were inevitable if that was the
only way companies could survive.
By ROBIN BULMAN, Reuters
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Tuesday December 23 10:24 AM EST
Kim Dae-jung's Remarks Rattle S.Korea Economy
By Yoo Choon-sik
SEOUL, South Korea (Reuters) - South Korean markets fell into an abyss
Tuesday over renewed alarm about a possible debt default in the country
and on President-elect Kim Dae-jung's reported remarks on the crisis.
But the President-elect's party said late Tuesday that Kim's comments
about "national bankruptcy" in South Korea were misunderstood.
"The president-elect did not mean there was a real possibility of a
national bankruptcy but wanted to express his willingness to undertake
restructuring," Kim Min-seok, senior vice-spokesman for the National
Congress for New Politics party, told Reuters.
Financial markets were unhinged by Kim Dae-jung's candid comments,
quoted in Tuesday's edition of the leading Chosun Ilbo newspaper. Stocks
plunged a record 7.5 percent, while the won tumbled against the dollar
and interest rates soared.
The newspaper quoted Kim Dae-jung as telling party members on Monday:
"We don't know whether we would go bankrupt tomorrow or the day after
tomorrow. I can't sleep since I was briefed (about the financial
situation). I am totally flabbergasted."
"This is the bottom. It's a matter of one month, no, even one day. I
just can't understand how the situation came to this. I can't help being
angry," he was quoted as saying.
"The government did this to our country," Kim Dae-jung said. "Our
response to the crisis must be accurate and no single mistake must be
allowed."
Officials at major South Korean banks were critical of Kim Dae-jung's
remarks, saying they had caused renewed alarm about the financial crisis
facing the country.
Kim Dae-jung, who won the hotly-contested presidential election last
Thursday, reiterated his commitment to implementing reforms mandated by
the International Monetary Fund (IMF), which earlier this month arranged
a record bailout of South Korea's faltering economy totalling $57
billion.
Kim Dae-jung also said he had made a mistake when he suggested during
the campaign he would seek to renegotiate the IMF's conditions for the
rescue loans.
He does not take office until Feb. 25, but incumbent President Kim
Young-sam has promised him a voice in national affairs until then.
Late Tuesday the party's chief policy maker Kim Won-gil said: "The
remarks should not have been read as indicating the possibility of
national bankruptcy."
The central Bank of Korea and the Finance Ministry tried to reassure
financial markets, especially international investors who are crucial to
South Korea's recovery, that the country was not facing sovereign
default.
Assistant central bank governor Lee Kang-nam tried to calm markets.
"Some news reports made the financial markets extremely unstable," Lee
told Reuters. "But given the current level of usable foreign currency
reserves and expected money inflows from the World Bank and the Asian
Development Bank, sovereign defaults will never happen."
Lee said several Japanese banks had agreed on Monday to roll over loans
to South Korean commercial banks, although it was unclear for how long
the maturities had been extended.
The heads of foreign banks operating in South Korea had an emergency
meeting on Tuesday to decide whether they would roll over loans to the
country's financial institutions, struggling with dollar shortages.
But investors whose nerves have been frayed by months of increasingly
bad news were not easily calmed.
The National Congress for New Politics party put out a statement quoting
Finance Minister Lim Chang-yeul as saying that while South Korea was now
"troubled to repay short-term debts," it would be able to settle the
debts.
But the markets focused on Kim Dae-jung's comments.
Stocks closed at 366.36 points, off 7.50 percent -- a record one-day
plunge in percentage terms.
The won plunged to an historic low of 1,995.0 to the dollar, before
recovering to close at 1,962.0, against Monday's close of 1,715.0 on
Monday.
South Korea's currency has lost 57 percent of its value against the
dollar this year.
A slew of ratings downgrades by Moody's Investors Service Inc. and
Standard & Poor's Corp. also dealt a blow to markets.
The credit agencies lowered South Korea's foreign currency ratings to
junk bond from low investment-grade status.
Interest rates on benchmark three-year corporate bonds with bank
guarantees soared to a record 31.45 percent before falling back to close
at 31.11 percent.
Meanwhile, the militant Korea Confederation of Trade Unions threatened
an "all-out struggle" if the government tried to make it easier for
companies to lay off workers.
Kim Dae-jung said Monday that layoffs were inevitable if that was the
only way companies could survive.
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