[News UP] Stock markets open normally due to 'emergency martial law' calm down...What's the economic impact?

■ Host: Anchor Yoon Jae-hee and Anchor Cho Jin-hyuk
■ Starring: Kim Dae-ho, Director of Global Economic Research Institute

* The text below may differ from the actual broadcast content, so please check the broadcast for more accurate information. Please specify [YTN News Special] when quoting.

[Anchor]
As the martial law situation is over in six hours, the authorities are trying to stabilize it in confusion. The domestic stock market will also open shortly. A financial market shock seems inevitable. Let me point it out with our economic impact expert. With Kim Dae-ho, head of the Global Economic Research Institute. Please come in.

I went through a situation where martial law was declared and then lifted overnight, and I think there must have been a lot of embarrassment in the domestic and foreign markets. First of all, please organize the situation overnight.

[Daeho Kim]
Overnight, the New York Stock Exchange, the European Stock Exchange, and the whole world fluctuated in great surprise. If you look at this as an index, you can divide it into two. The Dow and S&P indexes, which trade in the mainstream on the New York Stock Exchange, remained unchanged. I was surprised, but I was in a position to wait and see.

However, 45 years ago, one of the things that changed significantly from the martial law situation in 1979 was that at that time, there were no products in which Korean stocks and Korean bonds were directly listed on foreign stocks or indirectly listed in the form of stock certificates or ADRs. But there are many such products now. Representatively, POSCO fell 4.3%. In addition, the ADR, which is listed on the New York Stock Exchange such as KB Financial Group, SK Telecom, Korea Electric Power Corp., Woori Financial Group, and LG Display, fell sharply at one point.

And Coupang, a Korean company directly listed but directly listed, fell to 8%. Next, futures, comprehensively, can be seen as the most average index of Korea's composite stock index. That's the iShare MSI Korea Index, which is the most representative index to gauge the situation of the Korean stock market at night. It once plunged to 7.12%. However, by time, after the National Assembly voted to lift martial law, it showed a very rapid stabilization and rapid recovery, so our Cabinet finally confirmed the lifting at dawn. You can see that most of the shock was extinguished by offsetting the part that had fallen by then.

[Anchor]
However, since the volatility was so great, the impact seems inevitable in the future, but the Korean government decided to open normally at 9 o'clock. What's the background?

[Daeho Kim]
This seems to be a very good decision. Rather, if the exchange does not open normally and postpone the time or take a day or two off, isn't there really a big problem in Korea? It could have seen a big drop when it reopened three to four days later by amplifying these doubts, but there was a huge disturbance overnight, but Korea is doing well according to the system of the rule of law. I'm glad that I showed this.

However, many experts in the New York Stock Exchange are now the cause of instability in Korean politics. For example, the theory of impeachment or a battle of responsibility for the side that declared martial law. As these things intensify, various conflicts may arise. This kind of problem. Then, due to the unexpected declaration of martial law, I thought Korea was a completely democratized country in the international community, but there are still variables. The last thing I like about the stock market is uncertainty. There may be such a look of caution because of the uncertainty. In that sense, it seems that our financial authorities also need active and preemptive extraordinary management.

[Anchor]
I think this incident must have come as a considerable shock to those investors who thought the Korean market was stable. What do you think?

[Daeho Kim]
That's right. For a while, the Korean stock market has been quite bad this year. So, there was a saying that the Korean exodus and Korean market should leave, and in fact, foreign investors continued to fall out, and not only foreign investors but also domestic investors rushed to immigrate to Seohak ants. These days, when the U.S. stock market heated up due to this phenomenon of direct investment in foreign countries through Seohak ants, Korea fell alone. Unfortunately, foreigners started coming back last night.

It's fallen too far in the meantime. Korea's investment value is now increasing considerably. But because something unexpected suddenly happened overnight, the big question is how foreign investors' investment mindset and determination to return. For example, credit rating companies can be shocked by lowering their credit ratings in the wake of Korea's declaration of martial law and the resulting confusion. The Bank of Korea will also respond preemptively and hold a temporary Monetary Policy Committee soon. So I look forward to turning off the lights.

[Anchor]
While we're talking, the market just opened, so the transaction has just begun. I'm showing you the scene right now. Both KOSPI and KOSDAQ are now showing a sharp decline. And the exchange rate is rising to around 1415 won, so what kind of atmosphere do you expect in the stock market today as an expert?

[Daeho Kim]
The exchange rate you just mentioned is the biggest problem. The most immediate response comes out, and this exchange rate affects the whole nation right away. Isn't the exchange rate around 1415 won as soon as the foreign exchange market opens at 9 o'clock? First of all, I think it's a relief among the misfortunes. Because it went up to 1442 won overnight. And the closing market price, we closed at 2 a.m. and that was 1425 won. Compared to then, it's a little lower.

Therefore, the foreign exchange market's determination, which was surprised by the declaration of martial law, has stabilized a little. However, it was 1401 won yesterday during the normal daytime. Compared to that, anxiety is still reflected. In this context, Deputy Prime Minister Choi Sang-mok said he would make efforts to stabilize the stock market by providing unlimited liquidity, but the opening price is a simultaneous effect, so even people who cannot wake up in the morning hang up a lot of computer reservation systems in advance, so you need to watch the situation one or two hours later.

[Anchor]
I'd like to ask you an additional question about the exchange rate, but you said it was originally traded at about 1401 won, but it's up to 1410 won. It was difficult because the exchange rate was high, but is there a possibility that the high exchange rate will remain a little longer due to this incident?

[Daeho Kim]
In the end, this is the credibility of Korea. In the meantime, the exchange rate has risen due to the wrong economy in Korea. Our currency has depreciated. It's hard to see it like this. As the U.S. dollar has been unusually strong, the exchange rate of Korea, China, Japan, Europe, and other countries have all risen, so the exchange rate that has risen so far is not a special problem for the Korean economy. However, the exchange rate rose to KRW 1442 overnight, which is not a fluctuation of the dollar, but purely because of the geopolitical factor of Korea, the exchange rate soared.

In the future, how will foreign investors eventually view the situation in Korea? It can be seen that the exchange rate is determined accordingly, and the most important thing is certainty from now on and what will happen in the future. It's not about being impeached or not. If impeachment is declared, there is a good reason for impeachment, and if there is a good reason for it, the market can be properly harmonized because it invests accordingly.

So the most important thing in economic policy is softlanding, not hardlanding. We talk a lot about communication with the market. From now on, if our politics gives such a clear message that we will follow the democratic process according to the law at least in accordance with the rule of law, it can be stabilized, but if it is completely at odds and politics are paralyzed over impeachment, the exchange rate could actually rise significantly. As the exchange rate rises, the value of Korea's external assets and prices also rise a lot, so it can be seen that an increase in the exchange rate is very undesirable in the current situation.

[Anchor]
We just showed it to you on the screen.In the case of the won-dollar exchange rate, Ma started at 1418.1, up 15.2 won. The KOSPI fell 1.97 percent to 2450.76. The KOSDAQ opened 1.91% to 677.59. There's another breaking news about this. We will operate the 10 trillion won stock market stabilization fund immediately at any time. That's what we talked about. What does this mean?

[Daeho Kim]
a stock market stabilization fund This is commonly referred to as the Securities and Futures Fund in the stock market. When the market changes rapidly, the government has public funds, financial institutions have invested, and invested money. About 10 trillion won is enough volatility to prevent a company or a stock price from falling or soaring in an instant.

I put Article 10 on standby and said, "I will use it if it changes rapidly," but one of the luckiest things now is that the stock futures index, EWI, which best shows the situation of the Korean stock market following the Korean stock market, fell to 7% overnight, but if you look at the current opening situation, isn't it 1.97?

So, although the decline is a bit restless, the drop was relatively small compared to the seizure phenomenon in New York overnight. So, whether it is the international community or investors in Korea, the center of gravity is gradually changing to the fact that they can deal with the situation in Korea. In particular, if you have a 10 trillion won increase fund at any time, stocks that suddenly fall can be sold in reverse immediately.

If the Bank of Korea votes on the possibility of unlimited liquidity at the Monetary Policy Committee now, at least a short-term situation can be prevented. Restoration of confidence in the Korean system is the most important task in the mid- to long-term.

[Anchor]
What we're showing you on the screen is the real-time stock market transaction status, and I think it's better to point out this atmosphere. The exchange rate started at 1418.1 won, but now it is down to 1407 won. Can I say I'm looking for stability?

[Daeho Kim]
That's right. As I said earlier, the opening price depends on the amount of pre-orders for the simultaneous effect, which reflects a lot of overnight situations, so it's more like yesterday's situation. But after the opening, the exchange rate has decreased from 1418 won to 1407 won, hasn't it? Of course, it is still high compared to 1401 won yesterday, but the market is focusing on stabilizing the situation rather than spreading it to the more dangerous side. It's a relief among the misfortunes, so you can see it like this.

[Anchor]
Kim Byung-hwan, chairman of the Financial Services Commission, also said he would immediately develop a stock market stabilization fund worth 10 trillion won. Deputy Prime Minister Choi Sang-mok also mentioned unlimited liquidity supply. Heads of our economy. Following last night, we're having a meeting this morning, so what should we discuss first?

[Daeho Kim]
There are two aspects. First of all, the seizure phenomenon that can happen right away in the short term, which is called tentm in economics. Tentrum phenomenon can also cause sudden heart shock in people, but the fund is very effective in providing first aid at that time. It is already waiting for more than 10 trillion won in gift money. It is seen as an appropriate measure.

Second, the stability of Korea's economic policies toward international investors, credit rating agencies, and international financial institutions. And institutional system changes, such policies that give a sound message on these issues. These are the so-called F4 meetings of the Monetary Policy Committee or the so-called F4 meeting, and four people, including the Minister of Strategy and Finance, the Chairman of the Financial Services Commission, the Chairman of the Financial Supervisory Service, and the Governor of the Bank of Korea, are gathering, and these are the people who hold the cash cow. In fact, they've been seeing each other all night long. So the short-term treatment is going on like that, and now it's time to make the mid- to long-term plan more systematic.

[Anchor]
You mentioned your mid- to long-term plan, but you are ready to operate the 10 trillion won stock market stabilization fund of Kim Byung-hwan, chairman of the Financial Services Commission, which was delivered as a breaking news a while ago. And Deputy Prime Minister Choi Sang-mok mentioned that he would provide unlimited liquidity, but are these policies that have been prepared for the recent unstable stock market?

[Daeho Kim]
This is the 1997 IMF financial crisis. In order to prepare for a national emergency after the foreign exchange crisis was depleted, our economic fundamentals were very good even in the IMF situation at the time, but the impact spread when the foreign capital was insufficient. In that respect, for example, the Steam Stability Fund, which is used to perform emergency surgery in hospitals when there are patients. There is also a national budget, and the other is that each financial institution invests a certain amount of money. We do joint management of it.

First of all, there is 10 trillion won, and not only 10 trillion won, but also about 100 trillion won can be raised. In that sense, the current financial crisis can be prevented in the short term because it arises from political exogenous variables rather than from structural problems in our economy. The problem is the determination of investors around the world. Is it safe in Korea? instilling trust in such a suspicious point So, we need to immediately come up with mid- to long-term measures, and it seems more important than anything else for global credit rating agencies and international securities firms to give this stable confidence that Korea's economic situation is strong in terms of fundamentals and that Korea's political fluctuations will be good according to the system, constitution, and legal procedures.

[Anchor]
Let me ask you a more detailed question about the unlimited liquidity supply that Deputy Prime Minister Choi Sang-mok mentioned. Doesn't that mean literally liquidity, that we're going to continue to supply money to the market? What kind of measures does this specifically mean? The money of

[Kim Dae-ho]
Rinara is printed by the Bank of Korea. If you print it by the Bank of Korea and look at the Korean currency, it says the governor of the Bank of Korea. The money supply is the power to buy stocks when money ultimately determines supply and demand in the stock market, but when certain investors get scared of the Korean situation and leave the market, Kers, Chaos are caused by lack of demand. There could be confusion. I'll send it to Korea for an unlimited amount of money, and I'll stop panic for now, whether inflation comes or not. This is the situation.

So, it is the strongest measure that financial authorities can take out monetary reform, and usually, unlimited liquidity supply or announcing such measures has the effect of stabilizing the market without actually supplying liquidity. That's how determined he is. It can be seen as the will of Deputy Prime Minister Choi Sang-mok to stabilize the financial market to protect the market.

[Anchor]
The director said earlier that the impact on our economy could be prolonged if the impeachment continues, but haven't we already experienced impeachment of the president once? What was our economic situation at that time?

[Daeho Kim]
Even then, our economy was not too bad. Nevertheless, the sudden events caused the stock price to falter when the so-called Choi Soon-sil gate erupted. But the chaotic political situation didn't last long and one of the biggest advantages of that time was the president's office and the Congress leading the impeachment, the National Assembly. Also, the Constitutional Court is very orderly and marketable. So when you look abroad, you're afraid of impeaching yourself.Why the hell are you impeaching me, even if it's a flag? It's going to be impeachment again, it's not going to be. This uncertainty. Because of this, the stock market was a little shaken in the beginning.Ma has stabilized the market a lot since he continued to push for an orderly and stable impeachment. Rather than this uncertainty, the anxiety of not knowing what will happen in the future is the biggest enemy of the stock market and financial market.

[Anchor]
I think it's just right to say that the market hates uncertainty. I'll also ask you about the coin market. There has been a lot of volatility in the coin market since the martial law was declared, so how is the situation now?

[Daeho Kim]
It's been a huge crash, with Bitcoin falling 30% all at once overnight. Coins are traded together internationally, but the problem is that Korean coin ants sold coins intensively in the Korean market. Unlike other financial markets, Korean ants are very influential in the coin market. So investors in the U.S. or China also have martial law in Korea? I don't know what's going on, but first of all, let's sell bitcoin led by Korea, so I fell out a lot, but this is also the situation at 1 a.m. last night. After 1 o'clock, the National Assembly voted to lift martial law, almost making up for the fall. At the same time, it has almost returned to its normal level. However, the coin side is very volatile because it may be much more vulnerable to exogenous variables than others because it is currently on the rise in relation to President Trump's election, and there are no indicators that can be referenced unlike securities, stocks, and bonds. As such, you need to be more careful, so you can see it like this.

[Anchor]
Today, we opened normally amid concerns about whether the opening of our stock market and the stock market itself will be normal. Anyway, the situation in the National Assembly is fluctuating all day long, so will the stock market continue to be volatile today?

[Daeho Kim]
That's right. There is a possibility that the flow of funds will fluctuate depending on the question of how the world will judge the situation in Korea now. Fortunately, at least the current situation, it has been 15 minutes since it opened, and in fact, the derivatives market opened at 8:45. So you can see that it's been about 30 minutes, but so far, my surprised heart has been reflected overnight, but I'm calming down little by little. In this regard, there are currently two major variables. How is the Korean government responding positively, effectively and scientifically to this issue? The world is watching that now.

Another geopolitical factor is the declaration of martial law overnight by the Korean government and ruling party and opposition parties, as well as the sudden and swift lifting of the martial law. There's going to be a debate about accountability in this situation. How can the Korean government and political circles solve such problems wisely? If I had to pick up another one, how would international financial institutions, foreign media, especially credit rating agencies, see the situation in Korea? This part is very important, so you can see it like this.

[Anchor]
Some say that the Korean economy is on the verge of a triple decline, and political uncertainty is added to this at a time when warning lights are on that they are at the beginning of low growth. Mid-term to long-term prospects, what will our economy look like?

[Daeho Kim]
It can be said that the emergency lights have been turned on as the Korean economy is now difficult to consume and exports have slowed down a little recently, and the Bank of Korea, which had been optimistic, has lowered interest rates for two consecutive times. In particular, the reduction of next year's forecast to 1.9 has raised considerable concerns. But I don't think the Korean economy is in crisis.

This is because, rather than structural defects in the basic fundamentals of the Korean economy, various policies that President Trump has been introducing since he said he would shake up the tariff bomb, but since we are highly dependent on trade, it is not a tariff bomb toward Korea, but it is a little surprising, and I will not give Trump any more money if President Biden, who was supposed to give subsidies under the Semiconductor Chips Act, steps down. These factors have become bad news for Korea at the same time. And there are a lot of stocks related to artificial intelligence in semiconductors right now, but Korean semiconductor companies, especially Samsung Electronics, are not riding the artificial intelligence flow. There are some of these problems, and if we deal with them well, we are confident that we can overcome the difficulties of the Korean economy.

[Anchor]
Investors should pay attention to volatility. So far, we have been with Kim Dae-ho, head of the Global Economic Research Institute. Thank you.