Tumbling stock market

Mobilize all possible means to regain stability

South Korea was not immune from the global stock market crash Friday as investors went on a panic selling spree, gripped by excessive fears about the new coronavirus. The benchmark KOSPI at one point was down 8.3 percent to a near 10-year low of 1,680.60 points, activating circuit breakers. Fortunately, however, the index managed to reduce the freefall to close 3.4 percent lower at 1,771.44.

The market volatility followed tumbling U.S. equities Thursday, a day after the World Health Organization (WHO) declared the coronavirus outbreak a pandemic. The Dow Jones Industrial Average nosedived 10 percent to 21,200.62 points, marking the worst loss since Black Monday in 1987. The shock reverberated throughout European and Asian markets.

More worrisome is that such a global market crash could play out again and again in the face of the worsening coronavirus crisis. That is why countries around the world should step up their cooperation not only in fighting COVID-19, but also in minimizing the epidemic's damage to economies. The longer the virus persists, the greater the economic losses will be. This could also raise volatility and uncertainties in financial markets.

No country will suffer more than South Korea which is heavily dependent on exports for economic growth. Korea has already begun to experience the economic fallout from the viral outbreak due to the disruption of global supply chains. The Moon Jae-in administration has drafted an extra budget bill worth 11.7 trillion won ($9.6 billion) to help contain the virus, cushion its shock on the economy and offer financial support to severely-hit businesses, particularly smaller businesses and the self-employed. The National Assembly should approve the bill sooner rather than later.

Yet such fiscal expansion is insufficient in overcoming the economic difficulties arising from COVID-19. If necessary, the government must consider increasing the amount of the budget to better cope with the worsening situation.

The Bank of Korea also needs to take a more accommodative policy. It kept its key interest rate unchanged at 1.25 percent last month. But the central bank is considering holding a monetary policy meeting earlier than scheduled this month to decide whether to lower the rate.

As for market stabilization, the Financial Services Commission decided to temporarily ban short-selling, which is blamed for adding fuel to the market crash, for six months from Monday. The ban, the third of its kind in Korea, was last applied in 2011. The regulator also plans to temporarily raise the ceiling on domestic firms repurchasing their own shares.

The Ministry of Economy and Finance has also promised to take unspecified measures to reduce uncertainties and regain stability in the financial markets. on top of the market tumble, the Korean won has continued to lose its value against the U.S. dollar. The ministry should not hesitate to intervene to boost investor confidence and keep the markets stable.

Most of all, all economic players ― businesses, individuals and the government ― should work together to win the battle with the pandemic and ride out the virus-triggered economic hardship. It is time to take bolder action before it is too late.