Financial policymakers and regulators are raising their alert level and increasing their monitoring of the markets as the country faces a growing inflow of capital pulled out of emerging markets following the U.S. Federal Open Market Committee’s decision to maintain its monetary stimulus.

Korean policymakers are reportedly looking closely at incoming capital to see whether it is being invested in the financial markets for speculative purposes.

The sudden capital inflow, as well as outflow, could increase volatility in the markets, including the foreign exchange market where the Korean won could further gain strength against the U.S. dollar.

This could spell trouble for Korean exporters that have relatively enjoyed brisk overseas sales due to a weak currency.

Korea saw a capital inflow of about 8.2 trillion won to the stock market since late last month as global investors sought to draw their funds from emerging markets such as Indonesia and India to other Asian markets with stronger economic fundamentals, analysts said.

The FOMC said that it would wait for further signs of economic improvement before it begins tapering its monthly bond purchases.

“The Committee sees the downside risks to the outlook for the economy and the labor market as having diminished, on net, since last fall, but the tightening of financial conditions observed in recent months, if sustained, could slow the pace of improvement in the economy and labor market,” said the U.S. Federal Reserve in a statement.

“The Committee decided to await more evidence that progress will be sustained before adjusting the pace of its purchases.”

This has bought time for investors to reallocate their investments to other parts of Asia.

Analysts, however, said Asian financial markets need to prepare and brace for impact from the expected U.S. monetary tightening.

“Stocks and currencies have restored some lost ground (in Asia), while bond yields have fallen as demand strengthens. Still, it seems clear that the days of cheap money are nearing an end,” said Moody’s analytics in a report.

Bank of Korea Gov. Kim Choong-soo previously said that Korea would need to stay alert against a possible market impact from the U.S. tapering of its quantitative easing, despite the country’s sound economic fundamentals.

The BOK governor expects the U.S. to coordinate the timing and scale of its tapering in accordance with the economic conditions of not only the U.S. but also the rest of the world.

Nevertheless, he said Asia’s fourth-largest economy would need to counter uncertainties stemming from the phase-out of the U.S.’ quantitative easing with its own set of existing macroeconomic policies.

By Park Hyong-ki (hkp@heraldcorp.com)