Ten years on: Korea's financial markets since the financial crisis

Published on 14 Sep 2018, 10:31
리먼 파산 글로벌금융위기 10년...한국 금융시장 현주소는?

Lehman Brothers, then the fourth biggest investment bank in the U.S., filed for bankruptcy ten years ago this week, marking one of the key moments of the 2008 global financial crisis. How has it affected Korea's financial market and what has changed since then?
Our business correspondent Kim Hyesung reports.
September 15th, 2008.
U.S. investment bank giant Lehman Brothers went bust.
The ensuing financial crisis marked the worst global recession since the 1930s.

"We saw market turomoil reach new levels last week spill over to the rest of the economy."

Global stockmarkets plunged.
Korea saw its KOSPI index fall below the 1-thousand mark, the local currency depreciate to 1600 won against the greenback,... and a foreign capital outflow of around 26 billion U.S. dollars by the end of the year.

"Korea's benchmark Kospi is now at the 23-hundred level. In the last ten years since the global financial crisis, foreign investment into Korea has increased by 177 billion dollars. Plus, unlike back then, Korea is now a net creditor country."

"In 2014, Korea became a net creditor, meaning foreign countries owe more to Korea in the form of bonds and stocks than vice versa, lowering Korea's debt risk. At the same time, foreigners doubled their purchases of Korean bonds compared to 2008, a reflection of the country's higher credibility and better fundamentals like the current account surplus."

Korea has also signed new currency swap deals, and doubled its foreign currency reserves, increasing its buffer against external financial shocks.
All these are good numbers.
But Korea is not totally free from the shadow of the financial crisis.
A 700-billion-dollar U.S. government bailout, Europe's quantitative easing and rate cuts led to huge borrowing.
As of the first quarter of 2018, global debt reached a record 247 trillion dollars, and the debt-to-GDP ratio has exceeded 300 percent.

"Record monetary easing has resulted in debt-fueled global growth. At record-low interest rates, Koreans invested in houses. Household debt doubled, coming to 1-point-three trillion dollars this year. As the U.S. gradually lifts its key rates, this adds pressure to rates in Korea, and hurts households ability to repay their debts,... which could result in a mortgage crisis."

A decade after the global financial crisis, Korea has come out stronger.
But with emerging markets like Turkey and Argentina falling into a currency crisis, an escalating trade conflict between the U.S. and China, and ballooning domestic household debt, experts warn that Korea can't yet let up its guard.
Kim Hyesung, Arirang News.

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