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Stock prices plummet: uncaring government under fire

Posted October. 15, 2000 19:28,   


With the stock market in a nose-dive, many have begun criticizing the government for its lack of firm action.

According to academic and financial experts on Sunday, although a vicious cycle has developed in which problematic business reform policy causes a sharp fall in the stock market, which then creates more problems for reform, many have accused the government of adopting a "not-my-problem" attitude.

Many experts have denounced the government for its inability to formulate and adopt counter-measures for the promotion of healthy market development.

Above all else, the government's views on the stock market and the real market situation have been estranged. From his inauguration, Minister of Finance and Economy Jin Nyum has insisted, "Stock market prices are quite undervalued in comparison to the actual situation."

Many experts are saying that due to these false impressions, the government has gotten off on the wrong foot from the start. Rather than the current fall, the government had insisted on espousing an optimistic view that predicted a rather steep rise in the stock market toward the end of year, near the completion of the business sector reform.

The government's misguided view supported and was consistent with its stock market philosophy of "non-involvement is the best policy." Following the introduction of the futures market and the increasing presence of foreign investors in the Korean stock market, the government decided on non-involvement as temporary measures could only lead to opportunities for foreign investors to speculate and reap profits. However, the stock market has fallen to a level similar to that reached during the foreign currency crisis and the turmoil among investors has worsened in comparison to two years ago. Currently there are many businesses with prices far below the face value paid by investors, and in the Kosdaq market, there are many with prices that are 1/7th or 1/10th of the face value held by investors.

The government has also failed to successfully refine and revise its policy toward the stock market due to internal discord.

While the government has announced it would not adopt any short-term measures, it has not announced any long-term measures for the improvement of the quality and stability of the stock market. Although the government has allowed for a Mergers and Acquisitions Fund for the promotion of market independence, its effects will not be felt until after next year.