(Bloomberg) -- South Korea’s push to improve corporate governance and boost shareholder returns will survive the political turmoil as the initiative has bipartisan support, according to the nation’s top financial watchdog.
“Everyone is supporting this program regardless of their political orientation,” Lee Bokhyun, governor of the Financial Supervisory Service, said in an exclusive interview with Bloomberg in Seoul. “Whether there’s an impeachment, whether there’s power change, whether there is political instability, anybody who’s in charge will keep going on with this Value-Up program.”
His comments come at a crucial time for financial markets. President Yoon Suk Yeol’s shock martial law imposition and the opposition’s impeachment bid have raised concerns over a political gridlock that can hamper the government’s capital market reform efforts. While bigger shocks to equities and the won have been avoided as authorities promised unlimited liquidity and a 10 trillion won ($7 billion) stock stabilization fund, global investors say damage to the country’s reputation has already been done.
Read: Political Turmoil Adds Gloom to Beleaguered South Korean Markets
Lee said there are other steps and contingency plans being readied in case of further market turmoil, without disclosing details. He added the stock stabilization fund hasn’t yet been deployed as the moves have been “bearable.”
Korea’s equity benchmark Kospi has fallen nearly 3% since the short-lived martial law decree, with significant intra-day swings as traders weigh the political developments. The won, which plunged in offshore trading late Tuesday, has regained some ground.
Markets are bound to face even greater volatility next week, with a parliament vote on a motion to impeach Yoon set to take place on Saturday. In an abrupt U-turn on Friday, Han Dong-hoon — head of Yoon’s ruling People Power Party — called for the president to be suspended from office quickly.
The FSS governor said economic and finance chiefs will “gather immediately” after the political process.
In other key comments from the interview, Lee said:
- Regarding Korea Zinc Co.’s intensifying proxy battle, the governor said MBK Partners should persuade the industry and investors as well as the government that it can keep the crucial industry for the country’s manufacturing ecosystem intact
- “If MBK can persuade the shareholders that they have long vision of maintaining the entity, they might win the vote”
- “So far they have not persuaded the market or authorities. Blaming other party cannot be the main ground for their own governing reasons,” he said
- Regarding the opposition party’s push to revise the Commercial Act, Lee says while he’s a proponent of the revision, there are some “technical” issues and that’s why he’s proposing a revision to the Capital Markets Act
- Commercial Act covers over 1 million Korean companies including non-listed firms, but shareholders’ concerns are more related to issues such as mergers and double listings, which can be dealt with the Capital Markets act
- Lee was also “shocked” at the martial law imposition, and “wasn’t informed anything at all beforehand”
- The country’s economic system has endured a lot of political instability and external shocks over the last couple of decades, and “we can manage quite well this time as well”
--With assistance from Katria Alampay, Andy Hung, Sohee Kim and Emily Yamamoto.
(updates with more comments by Lee in the third bullet)
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