After Stock Market Plunge... Financial Authorities Hold Emergency Meeting: "Avoid Excessive Credit-Fueled Investing"

Financial authorities have launched an emergency review as volatility in the domestic stock market has surged recently. While describing the pace of the index decline and supply-and-demand conditions as somewhat excessive reactions, they urged financial companies to refrain from indiscriminate credit extensions and strengthen risk management. The authorities also said they would respond firmly to market-disrupting activities.

The Financial Services Commission said it held an “Emergency Meeting to Review Stock Market Conditions” on the afternoon of October 15, chaired by FSC Chairman Lee Eok-won, with officials from relevant institutions, including the Financial Supervisory Service and the Korea Exchange, and market experts in attendance. Participants reviewed domestic stock market trends and foreign and institutional investor flows amid rising external uncertainty, and discussed how to respond going forward.

Participants first assessed that stock market volatility had widened due to domestic and external macroeconomic conditions, including a growing likelihood of interest rate hikes in major countries such as the United States, uncertainty over investment and earnings prospects in the artificial intelligence (AI) semiconductor sector, and rising international oil prices.

However, they also assessed that the market had, to some extent, overreacted to external uncertainty, given the recent pace of stock price declines and investors’ trading patterns. They explained that key domestic industries, including semiconductors, defense, and shipbuilding, were delivering solid results on the strength of their global competitiveness, while the economy’s fundamentals—including foreign exchange reserves, the current account balance, and financial institutions’ soundness—remained robust.

They stressed that vigilance over heightened market volatility should be maintained, while guarding against the spread of excessive anxiety and sudden herding behavior. They also urged investors to make rational investment decisions by considering companies’ intrinsic value and medium- to long-term growth prospects.

Financial authorities and relevant institutions agreed to closely monitor domestic and international market trends and supply-and-demand conditions, while taking a zero-tolerance approach to false rumors spread to exploit market anxiety, price manipulation, illegal short selling, and other market-disrupting activities. They also plan to make thorough advance preparations so that contingency plans can be implemented swiftly if necessary.

Chairman Lee stressed, “Please remain vigilant even in the face of small fluctuations and take proactive steps to stabilize financial markets and protect investors.” He added, “Investing by relying on excessive debt and credit is risky, and risk management is all the more important at times like this.” He also urged financial companies to “refrain from indiscriminate credit extensions and make every effort to protect customers and manage risk.”

The KOSPI closed at 5,554.22 on October 15, down 454.59 points (7.57%) from the previous day. The decline was the largest in both points and percentage terms since July 28, when it fell 732.09 points (10.84%). At one point in the afternoon, the KOSPI fell below the 5,500 level, but later recovered some of its losses. Sharp drops early in the session also triggered sell-sidecars in succession on the KOSPI and KOSDAQ markets.  The KOSDAQ closed at 760.82, down 63.06 points (7.65%).

This content was produced with the assistance of AI translation services.