Korea Feels Wall Street Crisis ...And Reacts
Korea has once again been threatened by financial contagion that started in another country. In 1997, it began with Thai baht; this time, the trouble started on Wall Street. Since release of the October issue of Korea Insight, Korea’s financial markets have come under heavy pressure. The government of Korea has repeatedly expressed confidence about the soundness of its economy and financial markets, and emphasized that it has sufficient foreign reserves to deal with current liquidity problems. President Lee Myung-bak assured the nation that Korea will never undergo another financial crisis and that the current situation is fundamentally different from 10 years ago. Despite such optimism, stock prices and the Korean won plunged sharply as the global financial crisis deepened. Foreign investors unloaded local shares at a record pace and took dollars out of the country as they began to doubt the health of the nation’s financial system. Fear spread that the Korean economy could be entering into a deeper recession.