S. Korea’s Finance Minister Hong Nam-ki speaks at emergency economic policy meeting in Seoul on Aug. 7, 2019. [Photo by Han Joo-hyung]

Korean authorities on Wednesday vowed to take “all possible means” to stabilize the financial markets including regulatory changes as stocks and currency slid to 2016 levels despite verbal intervention and seeming actions to stop the rout spurred by the worsening trade environment.

“Volatilities have worsened in the financial markets due to multiple domestic and external risk factors. We will act fast and aggressively (to stabilize the markets) through all available means,” Hong Nam-ki, deputy prime minister and finance minister, said while chairing an emergency economic meeting with financial chiefs and the central bank governor before markets opened on Wednesday.

Bank of Korea Governor Lee Ju-yeol promised the central bank will act in sync with the government to normalize the markets.

The last time fiscal, monetary and financial policy chiefs got together was in September 2017 when North Korea carried out its sixth nuclear test.

Korean stocks and currency were battered this week amid growing worries about Seoul’s trade rift with Tokyo and the escalating trade conflict between the United States and China that has recently morphed into a currency war.

After briefly opening on a positive note after losing more than 4 percent over the last two days, the main Kospi finished Wednesday 0.41 percent lower at 1,909.71. The junior Kosdaq, which plummeted more than 10 percent over the last two days, recovered 2.38 percent to 564.64.

The Korean won edged up 0.03 percent to 1,214.90 versus the U.S. dollar, although still at 2016 levels.

Authorities are readying regulatory steps – easing treasury stock purchase rules and toughening up on short-selling – and will act “in a timely manner,” Hong said.

A ban on short-selling is also on the table, he added. Korea temporarily halted shorting activities during the 2008 global financial meltdown and the 2011 European debt crisis.

Short selling is a trading practice where the investor borrows shares and immediately sells them in hopes to buy them back later at a lower price and pocket the difference.

Short sellers help provide liquidity to stock markets and correct overvalued stocks. But they are also been blamed, along with speculators, for exacerbating market declines and adding to volatility.

Short sellers have been rampant in the recent market plunge. Shorting balance in Korea hit an annual high of 57.5 trillion won ($47.4 billion) in July, surpassing the 56.5 trillion won last October when the global stock markets crashed on intensifying U.S-China trade frictions. An increased shorting balance means there are more stocks that have been borrowed and not repaid, indicating an increased demand for going short.

The government plans to pour more than three-quarters of the supplementary budget over the next two months into driving private and public investment and mitigating the fallout of the Japanese export curbs.

“We will continue pushing Japan to stop its unfair restrictions while taking actions to minimize short-term damage to local companies while boosting their competitiveness and self-sufficiency,” Hong said.

Hong warned against excessive panicking, citing Korea’s strong economic fundamentals.

“Our economic health has improved considerably compared to the past,” he said. Korea’s foreign reserves and net external debt are also at a record high of more than $400 billion to buttress the local financial markets, he added.

By Sohn Il-seon and Kim Hyo-jin

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