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Stock market stabilization fund to be launched to ease downswings

In an effort to combat downturns in the stock market in the face of mounting concerns about global financial tightening and sluggish economic growth, South Korean financial regulators intend to establish a stock market stability fund.

According to the sources, Yonhap said that consultations are now taking place among the relevant agencies with a goal of finishing up the setup for the launch of the approximately 10 trillion won ($7 billion) fund this month.

The decision was made at a time when local stock markets have plummeted this year due to concerns about a global economic downturn and aggressive monetary tightening in the United States and other major nations. Approximately 27% of the benchmark KOSPI has been lost so far this year, according to business sources on Tuesday.

A similar-sized fund was set up in early 2020 in the face of heightened volatility caused by the outbreak of the coronavirus. It, however, was not tapped into as stocks later rebounded.

Approximately 120 billion won from the 2020 fund’s remaining assets as well as 880 billion won from the Korea Exchange, the Korea Securities Depository, and other financial institutions and companies would be used to support the soon-to-be-launched fund, according to the sources.

“It is part of efforts to load a gun so as to be ready to inject money in case market situations deteriorate,” a source said.

Last week, Kim So-young, vice chairman of the Financial Services Commission, called for the need to resume the operation of such a fund to take action in a timely manner against excessive movements in the market.

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