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S.Korea c.bank sees risks from rapid capital flows
 
 
  
 
 Reuters - Sunday, October  3
 
 
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SEOUL, Oct 2 - The South Korean central bank chief on Saturday warned of the risk of possible financial and foreign exchange market turmoil for Asian economies caused by large cross-border fund flows, citing their high external dependency.
 
Kim Choong-soo, governor of the Bank of Korea, told a prepared speech for an academic convention that increased market opening and liberalisation policies in Asia have left them highly vulnerable to external shocks and economic volatility.
 
"While causing domestic liquidity to swell, excessive inflows of global funds may at the same time generate steep rises in the prices of assets such as shares, bonds and real estate," he said.
 
He pointed to the fragility in the structures of many Asian economies as they were still stuck in the early stages of development, as well as low productivity and lack of competitiveness in service industries.
 
His remarks come after the finance ministry early this week warned of an increased risk from volatile fund flows in and out of Asia's fourth-largest economy and said it would keep monitoring the trends closely.
 
Since the U.S. Federal Reserve hinted at another monetary easing policy to stimulate the world's largest economy last week, foreign investors have been shifting towards higher-yielding emerging markets.
 
On Friday, Seoul shares <.KS11> soared to 28-month highs, bond yields were near historic lows while the South Korean won <KRW=> climbed to a 4-1/2-month high against the dollar.
 
 
 
 
   
 
 
 
 
 
 
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