(2nd LD) Financial authorities ask institutional investors to refrain from market-destabilizing trading

▲ Visitors pack Legoland Korea Resort, located in Chuncheon, 85 kilometers northeast of Seoul, on May 8, 2022. (Yonhap)

(2nd LD) financial authorities-institutional investors

(2nd LD) Financial authorities ask institutional investors to refrain from market-destabilizing trading

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SEOUL, Oct. 28 (Yonhap) -- South Korea's financial authorities called for cooperation from institutional investors, including the state pension operator, to refrain from stock trading that could heighten market swings, sources said Friday.

The request came as financial market volatility has been mounting in the wake of a recent default on a municipal government-guaranteed debt raised to fund the construction of the Legoland theme park in the eastern province of Gangwon.

According to the sources, the Financial Services Commission, the Financial Supervisory Service and the finance ministry held a hastily arranged meeting Thursday in Seoul with officials from around 10 major institutional investors.

The investors in attendance included the National Pension Service, Teachers' Pension, and the Land and Housing Corp.

During the meeting, the financial authorities asked for their cooperation in easing market swings by refraining from excessive "trend-following" trading and fund redemption that could prompt serious market swings, the sources said.

"It was a meeting where we asked for their restraint from excessive trend-following trading and redemption that exceeds ordinary levels," an official said on condition of anonymity, adding it was part of "preemptive" steps designed to stave off sharp market swings.

The request marked the latest in a series of government-led steps to stabilize the market that has been roiled by the so-called Legoland theme park debacle.

On Sunday, the government decided to inject an additional 50 trillion won (US$35 billion) worth of liquidity, including large-scale bond-buying schemes.

Regulators have urged banks, including such state-run policy banks as the Industrial Bank of Korea and Korea Development Bank, to minimize bond sale to help stabilize the debt market.

On Thursday, the FSC also eased regulations on loan-to-deposit requirements for banks aimed at helping them have more capacity to provide funds to businesses amid credit crunch worries.

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