Vice minister warns against market overheating during crisis management
‘Investors should look beyond current expansionary fiscal frame’
By Bae HyunjungPublished : Dec. 8, 2020 - 16:45
South Korea’s Finance Vice Minister Kim Yong-beom warned Tuesday that the ample liquidity level that arose during the COVID-19 crisis management procedure may trigger an overheating phenomenon in the assets market.
He especially urged real estate market participants not to get carried away by the current uptrend, pointing out that the country will phase out the current expansionary economic policies once the ongoing epidemic crisis dies down.
“Lately, leading economies have seen their stock prices climb and emerging economies have faced an increase in capital influx,” Kim said in a macroeconomic finance meeting held at the Korea Federation of Banks in central Seoul.
Such market trends across the globe are seen as indicating growing investor appetite for high-risk, high-return assets, according to the senior fiscal official.
The policy meeting was attended by officials from the Financial Services Commission, Financial Supervisory Service, Bank of Korea and Korea Center for International Finance.
“While there is ample liquidity in the market, the supply of (COVID-19) vaccines in the near future is likely to speed up the economic rebound and consequently boost asset prices,” Kim said.
“(The government) should keep up its guard lest such excessive market expectations may lead to an abnormally overheated asset market trend.”
The vice minister’s remark came as Asia’s fourth-largest economy saw its main bourse prolong its bullish run, surpassing the mark of 2,700 for the first time last week.
The rally was largely backed by foreign buying, which came to a net 6.13 trillion won ($5.64 billion) in November, according to data tallied by market watchdog FSS.
“These are optimistic signals for our economy as they reflect the alleviated epidemic spread, the recovery of the economy and improved expectations for Korean companies’ performances,” Kim said.
“But we should nevertheless keep watch on the possible volatility.”
One of the key concerns for Korea’s policymakers is the bubble-prone housing market, which has been weighing down on aspiring housebuyers and cutting down on the Moon Jae-in administration’s popularity.
“Real estate market players should make cool-headed decisions, taking into account that the (incumbent) expansionary economic policies will normalize once the (COVID-19) crisis ends,” Kim said, adding that the real estate market is especially susceptible to market sentiment.
Addressing the government’s latest announcement to extend social distancing rules in Greater Seoul, the vice minister reiterated vows to provide maximum financial support to small businesses.
“For the sake of economic recovery, it is crucial that vulnerable sectors should survive,” he said.
By Bae Hyun-jung (tellme@heraldcorp.com)