By Cynthia Kim and Yena Park
SEOUL, June 26 (Reuters) – Over an 18-year profession buying and selling currencies in Seoul, Namkoong Taehun was on the entrance strains of the collapse of Lehman Brothers, the post-Brexit plunge within the pound, and the received’s dramatic tailspin after South Korea’s 2024 martial regulation decree.
Now his job might be stretched across the clock as South Korea’s long-cloistered forex opens as much as a 24-hour buying and selling cycle from July 6, with banks trialling the system from Monday.
That is a transition even a veteran seller like Namkoong calls “daunting”, as Seoul tears down safeguards in place because the received’s collapse through the 1997 Asian Monetary Disaster.
“Once I first got here to the market, it was a 9-to-3 recreation,” mentioned Namkoong, 47, who’s a part of the 37-member FX buying and selling group at Hana Financial institution in Seoul, the nation’s greatest foreign exchange financial institution by buying and selling quantity. “You may rely the taking part monetary establishments on one hand.”
“Now, the market has expanded exponentially,” he mentioned, surrounded by a dozen empty espresso cups and eight screens blinking FX conversion orders.
“I am seeing a major enhance in demand for received property primarily based on the various monetary establishments which might be inquiring about them. We’re afraid that our workload will enhance considerably.”
Seoul’s priorities have reversed from three many years in the past: an open, absolutely accessible forex is a requirement in its pursuit of index supplier MSCI’s coveted “developed market” designation, which might increase the nation’s profile amongst world traders.
However there are clear dangers to an always-on received. Languishing close to a 17-year low versus the greenback, the forex is especially weak to pockets of skinny liquidity that might flip modest flows into disproportionately massive worth swings.
Sarcastically, the world-beating doubling of the benchmark KOSPI share index to all-time highs this yr is reinforcing received weak spot, because the heady features spurred abroad funds into report promoting to e book earnings or rebalance portfolios. On the identical time, South Korean traders proceed to favour U.S. equities, investing at an unprecedented tempo.
WON GUARDRAILS
To protect in opposition to liquidity gaps and buying and selling disruptions, reforms embody permits for offshore traders to carry and commerce the forex, an offshore received settlement system and an overdraft coverage.
“Beforehand, international monetary establishments have been solely in a position to convert cash,” mentioned a authorities official accountable for FX insurance policies, “however by means of the offshore received settlement system, they may be capable to immediately maintain and make the most of the received.”