ID :
150857
Tue, 11/23/2010 - 18:40
Auther :

3rd LD) Gov't to check economic impact of N. Korean artillery attack

(
(ATTN: UPDATES with BOK meeting results in paras 8-10)
SEOUL, Nov. 23 (Yonhap) -- The government will hold a meeting of economic
policymakers to monitor the economic fallout of North Korea's artillery attack on
Yeonpyeong Island in the West Sea, officials said Tuesday.
The finance ministry said the meeting, scheduled for Wednesday morning, will be
attended by senior officials from the Financial Services Commission, the Ministry
of Knowledge Economy, the central Bank of Korea (BOK) and the Korea Center for
International Finance.
"The meeting will focus on the impact of the attack on the economy and the local
financial markets, and what action must be taken," Vice Finance Minister Yim
Jong-yong said.
Other officials said that they are checking overseas reactions because news of
the surprise attack took place after the local financial market closed for the
day.
"The situation is being monitored closely to limit any repercussions, and a
24-hour emergency response team has been ordered to keep tabs on all economic
indicators and to react quickly to sudden developments on a real-time basis," a
ministry official said. Indicators such as credit default swaps and
non-deliverable forwards are being reviewed.
The official said Seoul plans to check local financial conditions, export
markets, raw material imports and prices of everyday commodities and foodstuffs.
Other reactions that will be monitored include those by overseas business
partners and prospective investors, and the effect the latest incident could have
on the country's sovereign rating.
The BOK convened an emergency meeting related to the attack to check overseas
currency and securities markets and investor responses that could result from the
North's military provocation.
"The BOK will comprehensively examine conditions of the financial and currency
markets and immediately set in motion an around-the-clock monitoring system in
the aftermath of the North's shelling of the Yeonpyeong region," the central bank
said in a statement released after the gathering.
"The BOK will proactively push to draw up market-stabilizing measures after
closely discussing them with the government if needed," it noted.
The new North Korean risks could affect borrowing rates and trigger sell-offs of
local holdings by foreigners that could have negative repercussions on the
economy.
Initial reports showed local Treasury bond forward rates taking a hit along with
foreign exchange rates in foreign financial markets.
Many government officials, however, claimed that the latest attack could fuel
downside risks and contribute to greater market volatility in the short term, but
added that conditions should stabilize with time.
They pointed out that North Korea has always been considered a risk for all
economic actors in the past.
While the market reacted with concern to the testing of North Korea's second
nuclear test in May 2009 and the sinking of a South Korean warship in March,
conditions usually stabilized within five days, they said.
The country's business community, meanwhile, called for a firm response to the
latest provocation and asked the government to take all possible action to
minimize its impact on the nation's economy.
Denouncing the attack, business organizations such as the Federation of Korean
Industries, the Korea International Trade Association (KITA) and the Korea
Chamber of Commerce and Industry urged the government to take measures to contain
the situation to prevent it from getting out of hand.
"There is a pressing need to prevent the latest crisis from affecting the
country's credibility and trade relations," a KITA official said.
Others executives from large conglomerates such as Samsung Electronics, Hyundai
Motor Co. and SK Group expressed concerns that the artillery attack would likely
have an adverse impact on the economy, at least in the short term.
yonngong@yna.co.kr
pbr@yna.co.kr
(END)

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