The South Korean government said Friday that it is ready to take swift countermeasures to stabilize financial markets against feasible risks from North Korean military threats.

“It is necessary to be more cautious about effects on the economy and financial markets, as North Korea is raising the level of threats of military provocations,” Vice Finance Minister Choo Kyung-ho said during a meeting of economic policymakers and regulators in Seoul on Friday.

Stressing that stocks and foreign exchange rates may be swayed by the security situation on the Korean Peninsula, Choo said the government will take every possible measure to stabilize the market via closer monitoring.

He said, however, negative effects on the economy have been found to be marginal so far.

“Despite the growing risks, commercial banks post sound liquidity in terms of their foreign currency holding.”

Among participants for the meeting were senior officials from the Financial Services Commission and the Financial Supervisory Service.

Earlier in the day, Finance Minister Hyun Oh-seok voiced concerns that the growing geopolitical risks from North Korea could affect the nation’s economy.

His and other economic policymakers’ comments came at a time when unfavorable economic indices for South Korea are predicted.

For only three days between Wednesday and Friday, foreign investors net sold Korean stocks and bonds worth about 3 trillion won ($2.75 billion).

On Friday, the Korea Composite Stock Price Index plunged 32.22 points, or 1.64 percent, from the trading session before to close at 1,927.23.

Following their heavy disposal on Wednesday and Thursday, foreigners also net sold shares totaling 670 billion won on the day.

The Korean won also lost ground against the U.S. dollar on Friday. The greenback rose by 8 won to close at 1,131.8 won.

A Tongyang Securities analyst hinted at the possibility that foreigners will expand their net-selling mode in the coming trading days.

In addition, CDS premium, a barometer for sovereign risk, held by Seoul climbed to 85.6 basis points as of April 3, marking the highest in seven months since it posted 85.9 basis points on Sept. 30, 2012.

North Korea has been issuing near-daily threats in response to military drills conducted by the United States and South Korea as well as the latest United Nations sanctions to punish it for its third nuclear test.

The communist country threatened Thursday to pull out its workers from the joint industrial complex in the North’s border city of Gaeseong if South Korea continues to insult Pyongyang’s dignity.

To placate overseas investors, the government is actively contacting with global organizations including the International Monetary Fund.

Further, a government-led task force is informing global rating agencies of detailed information in a bid to prevent Korea’s credit status from being downgraded.

By Kim Yon-se (kys@heraldcorp.com)