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S. Korea wary of market volatility from Evergrande woes, Fed's tapering: official

First Vice Finance Minister Lee Eog-weon speaks at a government meeting on macroeconomics and financial markets held in Seoul on Thursday. (Yonhap)
First Vice Finance Minister Lee Eog-weon speaks at a government meeting on macroeconomics and financial markets held in Seoul on Thursday. (Yonhap)
South Korea plans to closely monitor financial markets as China Evergrande Group's debt problems and uncertainty about the Federal Reserve's tapering issue could increase market volatility, a senior government official said Thursday.

First Vice Finance Minister Lee Eog-weon said the government will also pump up efforts to slow the growth of household debt in a bid to ease financial imbalances.

Global financial markets were rattled this week ahead of the Fed's policy meeting and due to concerns about a potential default by debt-ridden China Evergrande Group.

There were concerns that a possible default by the Chinese property developer may send shockwaves to the financial system. But such woes eased after the group said Wednesday it has agreed to a deal with local bondholders to pay interests.

After a two-day policy meeting, the Federal Reserve said Wednesday it is likely to start to taper its asset purchases soon and signaled it may hike the key rate as early as next year. The outcome was largely in line with market expectations.

"There is a possibility that market volatility could increase, depending on the pace of the Fed's tapering," Lee said at a government meeting on macroeconomics and financial markets.

"Market uneasiness from factors like China Evergrande could abruptly arise in the process of major economies' adjustment of (accommodative) monetary policy and deleveraging," he added.

Separately, Bank of Korea (BOK) Vice Gov. Lee Seung-heon said the Evergrande crisis has raised broader market fears. However, Lee said there is a consensus that a collapse of the Chinese debt-laden property developer may not freeze global financial markets.

The Fed's statement was largely in line with market expectations, but there is a possibility that the Fed may speed up the normalization of its monetary policy, the BOK vice governor said.

The KOSPI benchmark stock index fell 30.74 points, or 0.98 percent, to trade at 3,109.77 as of 9:02 a.m. The Korean currency was trading at 1,186 won per the US dollar, down 11 won from the previous session. (Yonhap)

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