[Photo by Financial Services Commission]
The first tranche 3.7 trillion won ($3 billion) of 10.7 trillion won state-backed fund to shore up the Korean stock market battered by virus scare will be expedited as early as next week, but the ammunition could turn out far lacking to defend the market versus volatility as the amount makes up a mere 1 percent of the Korean market cap.
Five financial holding firms and other institutions have agreed to back the record 10.7 trillion won stock market stabilization fund, said Eun Sung-soo, chairman of the Financial Services Commission on Tuesday. “The fund will be invested in stock ETF products through capital call, and the initial commitment would be 3 trillion won, more or less,” he added.
The funds pooled from related authorities like Korea Exchange, Korea Securities Finance Corporation, Korea Securities Depository and Korea Financial Investment Association – 700 billion won – will be invested first, and the other 3 trillion won collected from private financial companies within next month.
The remaining 7 trillion won will be injected according to market condition.
The fund will mostly invest in ETFs tracking indices of Kospi 200, Kosdaq 150 and KRX300. Currently, 35 products trace Kospi 200, 17 Kosdaq 150, and 13 KRX 300, according to the Korea Exchange.
Some experts however raise doubts about the effectiveness of the plan, saying no one knows when the current market volatility on the global scale will end. The size of the fund also is too small as the Kospi market is capitalized at over 1,000 trillion won.
By Jin Young-tae, Shin Yoo-kyung and Lee Ha-yeon
[ⓒ Pulse by Maeil Business Newspaper & mk.co.kr, All rights reserved]