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Last Updated:  Thursday, 13 March, 2003, 06:00 GMT
Korea bank seeks to prop up markets
Central Bank worker
The central bank is desperate to rebuild confidence
South Korea's central bank has pumped 2 trillion won (744m; $1.6bn) into financial markets, in an attempt to combat jitters over North Korea and a multi-billion-dollar corporate scandal.

Korean shares and the won have fallen sharply in recent days, as investors worried that more corporate malpractice could be uncovered after a $1.2bn accounting scandal at conglomerate SK Group.

The SK affair came at a time when tensions with communist North Korea have hit a peak.

Fears of widespread defaults on corporate bonds were the immediate trigger for the central bank's intervention, but Seoul is also struggling to maintain the country's credit rating.

Rating agency Moody's has confirmed it is not cutting Korea's grade, but troubled markets by slapping a negative outlook on the country's creditworthiness.

Systemic risk

Investors are now waiting for the central bank's next move, assuming that it cannot simply keep pouring money into financial markets.

The bank has said it does not favour rate cuts as the main way of reigniting investor confidence, but may allow banks more flexibility in their market operations as a means of freeing more cash.

The bank has also been quick to play down the SK scandal, arguing that it did not represent any form of systemic risk.

The problems at SK were completely unlike those that brought down Daewoo, once the country's biggest industrial group, in 1999.

Nevertheless, ripples are beginning to spread.

Government officials are scrutinising six conglomerates, spurred by the tougher anti-corruption policy of new President Roh Moo-hyun.


SEE ALSO:
Country profile: South Korea
10 Mar 03 |  Country profiles
Timeline: South Korea
10 Mar 03 |  Country profiles
Firm admits $1.2bn accounts error
11 Mar 03 |  Business
Korea in 'chaebol' crackdown
04 Mar 03 |  Business
Tests ahead for S Korean leader
25 Feb 03 |  Business


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