Taiwan, South Korea Stock Slump Prompts State Buying, Increased Scrutiny

[dkf]

By Chinmei Sung, Weiyi Lim and Saeromi Shin - Aug 8, 2011 7:54 PM GMT-

Foreign currency dealers work in front of a monitor displaying the Korea Composite Stock Price Index (Kospi), left, and the exchange rate between the South Korean won and U.S. dollar, in a dealing room at the Korea Exchange Bank headquarters in Seoul, South Korea. Photographer: SeongJoon Cho/Bloomberg

A stock-market slump that dragged Taiwan and South Korea’s benchmark indexes 20 percent below their highs prompted state-run funds to buy equities and Korean regulators to bolster scrutiny of trading activities. Benchmark indexes narrowed earlier declines.

Taiwan's government bought equities yesterday and this morning through four funds it controls, Philip Yang, a Cabinet spokesman, said. Korea Teachers Pension, the nation’s second- largest public pension fund, said it purchased about 70 billion won ($64 million) of stocks during the recent selloff. South Korea’s Financial Supervisory Service said it will monitor short selling and whether brokerages are following trading rules.

“The big concern here is wealth destruction, that is investors capitulate and sell, triggering a snowball effect,” said Gavin Parry, managing director of Parry International Trading Ltd. in Hong Kong. “If this continues, governments in the region will most probably step in.”

http://www.bloomberg.com/news/2011-08-09/taiwan-south-korea-stock-slump-prompts-state-buying-increased-scrutiny.html