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Korea¡¯s financial markets have fallen prey to malicious rumors, including one that claims the country¡¯s economy will face a crisis this month or that its major business conglomerates are looking at a liquidity crunch. These rumors are harming businesses and investors. The impact of such rumors was first witnessed during protests against the resumption of U.S. beef imports earlier this year, and now they are felt in the stock, foreign exchange and bond markets, as well as the broader economy including big business.
Financial authorities and experts say market players involved in ¡°short selling¡± (borrowing a security from a broker and then selling it with the intention of repurchasing it later at a lower price to profit from the falling price of a stock) may be behind the rumors. Foreign investors in particular, who have led this practice, are being pointed out as the source of the rumors. The Financial Supervisory Service said Thursday it will investigate ¡°the link between short selling and forces that have been spreading the rumors,¡± suggesting that foreign investors are under scrutiny. The FSC also suspects some foreign exchange dealers and currency speculators are the sources of these rumors.
If in the past so-called leaflets containing various bits of unsubstantiated information that are passed around the stock market as well as phone calls were the sources of malicious rumors, now the Internet has become the proverbial Pandora¡¯s Box. Professional con artists are believed to use Internet bulletin boards or chat functions to spread information, even hiring part-time workers to do that. One staffer at a brokerage said once rumors spread randomly through Internet chat, staff at financial institutions pass them on to their clients and friends. This is how rumors are spread and reproduced.
The FSS has so far in principle taken action only once a company that suffered damage due to a rumor finds the source of the rumor and reports it. But with malicious rumors becoming so rampant as to rattle the country¡¯s financial markets, authorities have rolled up their sleeves to deal with the situation themselves. Financial authorities on Thursday formed a joint task force with related agencies and toured the floors of brokerages and began monitoring various websites. Financial Supervisory Service Governor Kim Jong-chang said 45 brokerages are being investigated for short selling, and his agency is in talks with the Financial Services Commission to toughen regulations on the practice.
Meanwhile, Korea is going ahead with the issue of foreign exchange stabilization bonds worth US$1 billion next week, the Finance Ministry said Thursday. Wire reports say S&P gave an ¡°A¡± rating to the debt offering, which is equivalent to Korea¡¯s current sovereign credit rating, while Moody¡¯s and Fitch rated it "A2" and "A+" respectively.
However, high demand for U.S. dollars by the Korean government, financial institutions and businesses is raising borrowing costs on global financial markets and continuing anxieties. According to the Korea Center for International Finance, the spread on forex stabilization bonds maturing in 2013 was 1.88 percent, the highest level since January last year. The spread was just 0.6 percent in January last year, but rose to 1.3 percent at the end of last year due to the impact of the U.S. subprime mortgage crisis and another 0.58 percentage points this year.
(englishnews@chosun.com )
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