Deputy Prime Minister and Minister of Economy and Finance Koo Yun-cheol said Tuesday that trading volumes in single-stock leveraged products have fallen sharply following the government's corrective measures, pledging to do everything within its policy reach to ease volatility in capital markets.

Koo made the remarks at a Cabinet meeting held at Government Complex Sejong, where he reported on emergency governance measures and response efforts related to the war in the Middle East.

Deputy Prime Minister and Minister of Economy and Finance Koo Yun-cheol and Financial Services Commission Chairman Lee Eok-won speak at a Cabinet meeting chaired by President Lee Jae Myung at Government Complex Sejong on Tuesday. [Yonhap]
Deputy Prime Minister and Minister of Economy and Finance Koo Yun-cheol and Financial Services Commission Chairman Lee Eok-won speak at a Cabinet meeting chaired by President Lee Jae Myung at Government Complex Sejong on Tuesday. [Yonhap]

According to the government, the daily trading value of single-stock leveraged products stood at 800 billion won ($565 million) on Friday, down 96 percent from the peak of 19.4 trillion won and 93 percent from 12.4 trillion won recorded on July 30. The turnover rate also fell sharply to 14 percent on Friday, compared with a high of 249 percent and 218 percent on July 30.

The government attributed the decline in trading volumes to its corrective measures for single-stock leveraged products. It raised the minimum deposit requirement starting July 31 and extended the mandatory investor pre-education period from two hours to three hours on Friday. From Aug. 19, it will tighten obligations on brokerages and asset managers to manage tracking-error rates and introduce simulated trading in addition to the pre-education requirement.

On the stock market, Koo said share prices "are still fluctuating, but Bloomberg recently assessed that volatility is easing somewhat." Bloomberg reported Sunday that market turbulence may have peaked as volatility in Korean equities calmed following the unwinding of leveraged positions. The Kospi closed at 6,299.66 on Monday, up from 5,593.56 on July 30.

Price stability also remains a concern amid ongoing uncertainty over international oil prices driven by Middle East tensions. Crude prices have been fluctuating in the $80 range due to uncertainty surrounding negotiations to reopen the Strait of Hormuz and Houthi attacks on Saudi oil facilities and oil tankers.

Consumer price inflation slowed to 2.8 percent in July from 3.2 percent in June, returning to the 2 percent range for the first time in three months. The government said upward pressure on prices is likely to persist in August, however, due to a base effect from a temporary telecom fee discount last year and the ongoing heat wave.

Koo said the government plans to accelerate the procurement of alternative oil supplies and restart a strategic petroleum reserve swap arrangement this month. "We will expand international joint stockpiling, bring in reserve volumes ahead of schedule, and extend the supply stabilization measures we have taken so far — we will mount an all-out response," he said.

The government has secured crude oil and naphtha volumes for August at more than 100 percent of last year's monthly average, but it plans to continue monitoring supply conditions from September onward in preparation for potential import delays caused by disruptions to shipping through the Strait of Hormuz and the Bab el-Mandeb Strait.

On international joint stockpiling, the government has concluded talks with Saudi Arabia on a reserve of 6.2 million barrels and is in discussions with the UAE on an additional 2.5 million barrels. It is also seeking to extend an emergency supply adjustment measure for naphtha and petrochemical products set to expire Aug. 26.

Agricultural prices are broadly lower than a year ago, but the government said it will remain on guard against supply disruptions from the heat wave and drought. Koo said vegetable and fruit prices are generally in better shape than last year, but upward risks from extreme heat and drought remain, and the government will operate a special management period to ensure supply stability.

The government launched a special heat wave and drought management period on Friday, rolling out emergency water spraying and supply support, heat-blocking coating assistance, and government purchases of cabbage and radishes. To ease the burden on household budgets during the vacation season, it is also pursuing discounts of up to 57 percent on 3,838 processed food items — including ramyun, ready-to-eat meals and frozen desserts — this month.

On employment, the government will identify response measures focused on sectors with weak job growth, including manufacturing and construction. Koo said the first round of the "Everyone's Startup" project has selected 5,000 participants and is now under way, adding that a second round will be announced this month to select an additional 10,000, bringing the total to 15,000 participants to drive economic growth and job creation.


y2k@heraldcorp.com