|South Korea Stocks Surge by Record on Fed Dollar Swap (Update3) |
By William Sim and Saeromi Shin
Oct. 30 (Bloomberg) -- South Korea's stock index rose by a record and the won surged after the central bank signed a $30 billion currency swap with the Federal Reserve and President Lee Myung Bak said he's ready to take more steps to aid the economy.
The swap line is part of the Federal Reserve's efforts to alleviate a credit freeze in emerging nations, with the U.S. also providing dollars to Singapore, Brazil and Mexico. Korean lawmakers today approved the government's $100 billion guarantee of bank debts to help lenders struggling to access foreign funds.
Korea's currency jumped 14 percent, the most in a decade, as policy makers' actions allayed concern the nation was headed for a repeat of 1997, when it needed an International Monetary Fund bailout to help repay offshore debt. The Fed's dollar provisions are part of increased global endeavors to thaw money markets, with Hong Kong and Taiwan lowering interest rates today following cuts yesterday by the U.S. and China.
``This is the strongest measure so far,'' said Chang In Whan, chief executive officer of KTB Asset Management Co. in Seoul, which manages the equivalent of $4.3 billion in equities.
The Fed deal ``will create a buffer for Korea's foreign- currency supply and improve foreigners' confidence in the country,'' Chang said. ``It shows the Fed won't just sit back and watch overseas markets go down.''
Default protection costs on South Korean government debt fell by the most in more than four years. Five-year credit- default contracts on the country's external debt fell 130 basis points to 435, according to a Bloomberg survey of three dealers.