Same day, different holiday: Mid-autumn festivals across East Asia
N.Korea could use nuclear weapons at any stage of conflict: Pentagon
Yoon hosts luncheon meeting with Korean atomic bomb victims in Hiroshima on Chuseok
Swimmer, gamers celebrate Chuseok with gold medals
Memorials commemorating Itaewon crowd crush to be erected at accident site
The many regional flavors of songpyeon, a Korean holiday dessert
Opposition leader proposes meeting with Yoon amid growing party feud
NewJeans hits 1 bln streams mark on Spotify with debut album
Whisky imports surge 40% through August, suggesting record-breaking year
Expressway traffic congestion persists on 2nd day of extended Chuseok holiday
Korea readies emergency liquidity to contain ‘Legoland Crisis’By Choi Si-young
Published : Oct. 23, 2022 - 16:05
South Korea’s economic policy chiefs, led by Finance Minister Choo Kyung-ho, said Sunday the government would expand liquidity facilities to buy corporate bonds and commercial paper to stop a recent credit default from spilling over into the wider financial market.
“The government will earmark 50 trillion won ($34 billion), at the least, to avoid a liquidity crunch,” Choo said, noting the fund will be used starting Monday to calm growing worries over the corporate debt markets. They were prompted by delinquency issues surrounding a local Legoland theme park in Chuncheon, Gangwon Province, which opened to the public in May after yearslong delays over profitability concerns.
Earlier this month, the local developer that built the park in partnership with Merlin Entertainments, a United Kingdom-based attractions operator, declared it had defaulted on the overdue payments worth $142.3 million. Investors were spooked because the top-rated short-term papers were backed by Gangwon Province in what many saw as a provincial guarantee against any insolvency.
Kim Jin-tae, governor of Gangwon Province, fueled worries Friday, when he said he would still take the company into court receivership. The governor, however, moved to downplay concerns over a default spillover, saying his office would deliver on the liabilities using the provincial budget that he said would be finalized by year-end.
“All of the outstanding debts will be cleared by Jan. 29 next year,” Kim told reporters, saying liquidating the company assets under court supervision was still necessary to pay off taxpayer money put into the park.
Critics have questioned the timing Kim chose to walk back on his earlier decision that had left out the direct provincial help to pay off the debts owed to Legoland investors. Kim, a former two-term conservative lawmaker who came into office in July with eyes set on austerity, has described as ill-conceived the park that his liberal predecessor had put up. Benefits like job openings were inflated, according to Kim, who the critics say is keen to politicize the project to make a name for himself.
“I see no room for political maneuvering when it comes to the park, and I don’t believe Gov. Kim had made his decision looking for some political gains,” Choo told a parliamentary audit Friday, the same day Kim reversed his decision and promised to tap into the provincial budget to soothe commercial paper holders. Ten local financial institutions, mostly securities firms, had packaged the instrument into wealth management products for retail investors.
Choo, who at the time stressed “reliability” investors expect from the government, addressed the issue again at the Sunday meeting. “Guarantees made by the government and municipalities on every commercial paper will be made whole. I’m making that crystal clear again,” said the finance minister, who doubles as deputy prime minister.
The Sunday gathering -- joined by President Yoon Suk-yeol’s economic adviser and the three chiefs from the central bank, top financial policymaker and financial watchdog -- also discussed efforts to communicate more clearly with investors.
“Everything that’s doable through engaging markets in dialogue is on the table,” Chairman Kim Joo-hyun of the Financial Services Commission said, referring to measures to come. Soaring interest rates are one of the fundamental reasons behind growing volatility gripping the bond markets, according to the top financial policymaker.
The Bank of Korea this month raised its policy rate to a 10-year high of 3 percent by 50 basis points -- an increase that is twice the usual size. Such a bigger-than-usual hike, first seen in July, is also expected at the November meeting. The central bank expects higher borrowing costs to cool demand and corral inflation over time.
And recession worries over monetary tightening is discouraging companies from borrowing and investors are too wary of liquidity stress. Last week, a consortium of securities companies failed to find investors to refund what will be one of the biggest housing projects in downtown Seoul.
“The support measures we’re making public today do not warrant a shift in our monetary policy,” BOK Gov. Rhee Chang-yong said, hinting that the current pace of aggressive tightening aimed at tackling unbridled borrowing will remain unchanged.
The top banker declined to elaborate on what the bank would do about the requests from local financial institutions -- banks, brokerages and insurance firms -- that they be able to take out more loans using their commercial papers as collateral. The bank’s seven-member board that makes a rate decision will look into the issue shortly, Rhee said.
S. Korea wins bronze in pistol mixed team event for 14th shooting medal
Traffic heavy on expressways following Chuseok
S. Korea to extend $5 mil worth of fertilizer aid to Ukraine via U.S. agency