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Korea mulls curbs on capital outflow

Finance Minister Choi Kyung-hwan indicated Tuesday that the government may take action to stabilize financial markets if there is a sudden capital outflow.

Minister Choi also tried to ease concerns among foreign shareholders about the nation’s negative views on short-term speculative investments.

Choi Kyung-hwan, deputy prime minister and minister of strategy and finance. Yonhap
Choi Kyung-hwan, deputy prime minister and minister of strategy and finance. Yonhap

“If the U.S. Fed rate hike gives a severe boost to capital outflow (from Korea), we may revise the system and bring in more control policies,” he said during a meeting with foreign correspondents in Seoul.

He added that the current supervision system imposes partial restriction on short-term capital influx, which is sufficient under current circumstances.

He reiterated that all forms of legitimate foreign investment is welcome here, if it abides by South Korea’s laws and regulations.

The minister also referred to U.S. hedge fund Elliott Assiociates, which has been blasted for possible “dine and dash” practices amid its recent battle with Samsung C&T.

“The so-called Elliott-type investment is welcome, as long as it stays within legitimate boundaries,” Choi said.

The U.S. hedge fund had opposed the merger proposal between Samsung C&T and Cheil Industries, the two pillar affiliates of the nation’s largest family-run conglomerate.

Elliott claimed that the 1:0.35 swap merger ratio would causes losses to Samsung C&T’s shareholders, including itself. Upon the merger, Elliott’s share in Samsung’s construction and trading arm fell to 2.03 percent from 7.12 percent, after the deal was passed at a shareholders meeting last Friday.

“The merger was decided by the shareholders, based on the related laws,” the minister said.

The nation’s economic chief also said that the nation’s growth rate has slowed down by a considerable range in the second quarter, mainly due to the global slowdown and falling oil prices.

“The MERS outbreak and the recent drought, too, acted as a negative variable,” he said, referring to the Middle East respiratory syndrome outbreak in Korea in the last two months.

But exports will pick up momentum in the second half of the year and make it to the 1 trillion won ($860 billion) mark for the fourth straight year, he added.

“Household debt management is relatively stable, as the level of financial assets is more than double that of debt,” he said.

“We will further reinforce our measures as to support nonmonetary institutions and lower bracket financial consumers.”

Choi also reiterated the government’s plan to inject an additional 12 trillion won in the economy and provide a new growth momentum.

“Korea’s economy now stands at a crossroads, on whether to flop down or to leap once again,” the deputy prime minister said.

By Bae Hyun-jung (