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FSC chairman urges cool-headed response to Brexit

All News 16:48 June 26, 2016

SEOUL, June 26 (Yonhap) -- South Korea's top financial regulator sought to calm the jittery market on Sunday, saying Britain's plan for an exit from the European Union is a "political" development.

Yim Jong-yong, chairman of Financial Services Commission (FSC), drew a clear line between Brexit and global financial woes attributable directly to troubles in finance or state budgets.

"The impact (of Brexit) to the (global) economy will show an indirect and gradual trend," he said, presiding over an emergency meeting attended by officials representing the country's equity market.

Jolted by Britons' decision to leave the EU, South Korea's benchmark index, the Korea Composite Stock Price Index (KOSPI), dropped 3.1 percent to 1,925.24 points on Friday in the largest daily loss in over four years.

The local currency also fell 29.7 won to 1,179.9 won against the U.S. dollar, losing the most in nearly five years.

The stock and currency markets are scheduled to resume operations on Monday after a weekend break.

The FSC chief stressed the need for a calm response to such short-term market fluctuations stemming from increased uncertainties and risk-averse sentiment.

The results of the British vote does not mean the nation's immediate departure from the EU, as it is expected to take at least two years to complete related negotiations, he pointed out.

In regards to the local market situation on Friday, he noted that it avoided the worst, compared with past crises.

"The combined net trading of stocks at the KOSPI and the (secondary) KOSDAQ stood at the relatively moderate level of 63.1 billion won (US$538 million)," he said. "The credit default swap (CDS) spread rose just 6.5 basis points. The impact of Brexit did not expand to the level the government worried about."

Yim said that the South Korean economy has already suffered a number of crises so far and it has the capability to handle such negative external developments.

He made it clear, however, that the government is not playing down the historical significance of Brexit itself.

Certainly, he said, it's an important event to bring a change to the global economic and financial order established after the end of the Cold War.

"What's important for us is to keep a watch on the shift in the world's economic order in a calm and cool-headed manner," he said.

The policymaker added the government will closely monitor global market situations and implement "timely and appropriate" policy measures if the need arises.

lcd@yna.co.kr
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