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Friday, December 26, 1997 Published at 14:49 GMT


South Korea stocks rise sharply on IMF aid deal
image: [ The loans have given investors something to be happy about ]
The loans have given investors something to be happy about

South Korea's troubled financial markets have shown signs of recovery on the first day of trading following the announcement of billions of dollars worth of international aid.

The BBC's Charles Scanlon reports from Seoul (Dur: 51")
Immediately after the markets opened, share prices rose 7%. The stock index in Seoul closed the day up 6.7% at 375 points.

The South Korean currency, the won, recovered some of its value, rising almost 24% to trade at 1,400 won against the US dollar after hitting a record 2,000-won-low on Wednesday.

Analysts said the rise in shares reflected confidence among investors that the worst was over and they said they expected the market to strengthen further.

"The worst seems to be over. Expectations of dollar inflows killed speculative dollar buying," said a domestic bank dealer.

The International Monetary Fund (IMF) and leading industrialised nations agreed on Wednesday to provide $10bn to aid the crippled South Korean economy within the next few days.

In return for the cash, Finance Minister Lim Chang-Yuel said Seoul had finally bowed to tough demands from the IMF for financial restructuring.

Job losses in financial sector

South Korea has authorised immediate redundancies at finance sector firms in the case of mergers or acquisitions. This move is expected to make ailing local banks more attractive to foreign buyers.

The decision was reached at an overnight meeting of the powerful 12-member economic task force.

The National Assembly will insert a new clause into reform bills to authorise the lay-offs this month.

"We have to allow lay-offs at financial units as soon as possible because the IMF strongly pushes for the restructuring of the financial sector," said a government spokesman.

Job losses in other sectors including manufacturing will not be allowed until early 1999 in line with current labour laws.

President-elect Kim Dae-Jung on Friday met labour union leaders and explained the inevitability of job losses. He called for their understanding and cooperation.

The measure is designed to increase interest among foreign banks in buying ailing South Korean companies.

As part of his reforms the President- elect also promised to cut the presidential secretarial staff by half.

A South Korean News Agency has reported that the government is seeking to sell the Korea First Bank and Seoulbank to foreign banks such as Citibank and Chase Manhattan.

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