By Choonsik Yoo and Yena Park

SEOUL (Reuters) -South Korea’s plans to loosen restrictions in its foreign money market will elevate the received’s standing globally and increase enterprise alternatives for native monetary corporations, a vice finance minister instructed Reuters on Thursday.

The brand new measures, unveiled earlier this week, name for greater than doubling the buying and selling hours for the received till previous midnight native time and permitting certified international monetary corporations to instantly commerce the foreign money by two onshore spot brokerage homes.

Vice Minister Bang Ki-sun mentioned the federal government was engaged on follow-up measures with the intention of implementing the plans in July subsequent 12 months, whereas dismissing issues the strikes may make the received extra unstable.

“We aren’t totally permitting the received to be freely traded exterior the nation however simply make it extra convertible,” Bang instructed Reuters in an interview, including the federal government would nonetheless keep its oversight over the monetary establishments buying and selling the received.

South Korea has grown to one of many world’s high 10 economies in just some many years however has stored a good grip on its foreign money market, primarily out of the trauma from its close to sovereign default within the late Nineteen Nineties throughout the Asia monetary disaster.

South Korea’s financial system contracted within the December quarter however Bang mentioned the newest data indicated it could return to development within the January-March interval, with out offering particular knowledge.

He mentioned there was no significant issue seen behind large international fund outflows up to now two consecutive months from native bond market, apart from the very fact there was a considerable amount of bonds coming to maturity throughout the interval.

RISKS FROM REAL ESTATE MARKET SLUMP

Bang additionally mentioned there was nearly no hazard of South Korea’s cooling actual property market inflicting a systemic threat to the bigger monetary system, noting coverage measures have succeeded in diffusing cash market strains associated to property initiatives.

Home costs in South Korea fell 1.98% in December from a month earlier, the quickest drop since knowledge releases started in late 2003 and a seventh consecutive month of decline.

“Whereas there may nonetheless be corporations falling into hassle individually, we will take care of them with focused measures, however basically, I do not see the actual property market-related issues will trigger a broader systemic threat,” Bang mentioned.

The three-month industrial paper yield had soared by greater than 200 foundation factors (bps) in just a few weeks from simply above 3% in late September final 12 months on issues about potential debt defaults by property builders.

The federal government, together with the monetary regulator and central financial institution, has since stepped in with a collection of support programmes and the yield has fallen retreated by greater than 100 bps in a number of weeks.

Concerning the received’s fast acquire of greater than 15% over the previous three months, Bang performed down its affect on exports, saying the nation’s exporters now compete with their model energy and high quality moderately than costs.

“Korea’s export construction has been altering towards relying extra on high quality competitiveness, and so, we should always make extra efforts to that route,” Bang mentioned, whereas explaining the minimal impact of the international trade charge on exports.