Koo Yun-cheol vows close watch on stock market risks as semiconductor weighting amplifies volatility

Deputy Prime Minister and Finance Minister Koo Yun-cheol said Wednesday he would "closely examine risk factors that could trigger excessive volatility in the stock market."

Koo made the remarks at a market situation review meeting — known as the F4 meeting — held at the Seoul Government Complex, with the Bank of Korea, the Financial Services Commission and the Financial Supervisory Service in attendance. "The stock market has seen some volatility expand as it undergoes a correction driven by profit-taking and rebalancing sales by foreign and institutional investors following a sharp run-up, as well as uncertainty over the global AI industry outlook," he said.

The meeting was attended by Bank of Korea Governor Shin Hyun-song, Financial Services Commission Vice Chairman Kwon Dae-young and Financial Supervisory Service Senior Deputy Governor Lee Se-hun.

Participants assessed that while the economy continues to perform well — with exports and the current account surplus at record highs — volatility in domestic financial and foreign exchange markets remains elevated, driven by expectations of higher global policy interest rates and a sustained outflow of foreign capital.

They noted that a divergence is emerging between the non-IT sector and the semiconductor-driven IT sector, and that the semiconductor industry's swings are exerting a growing influence on the broader market, making the rising weight of semiconductors a factor amplifying financial market volatility. Participants agreed on the need not only to strengthen the competitiveness of key industries such as semiconductors and AI, but also to actively identify and nurture next-generation non-IT growth engines, including biotech, defense and aerospace.

They also agreed to keep a close watch on the possibility of renewed geopolitical tensions, to operate a balanced macroeconomic policy mix that takes into account growth, inflation, financial market stability and the livelihoods of ordinary citizens, and to continue sector-by-sector market stabilization efforts.

On the bond market, participants noted that volatility in Treasury bond yields has eased somewhat since the start of July, but said that shifts in domestic and overseas monetary policy stances could act as risk factors going forward. They agreed to monitor the market closely and to adjust the issuance ratio of long-term Treasury bonds in light of supply and demand conditions, taking all necessary steps to ensure market stability.

On the foreign exchange market, participants assessed that volatility has increased due to continued selling of equities as the value of foreign-held stocks rises, along with a stronger US dollar and a weaker Japanese yen. They noted that the launch of 24-hour foreign exchange market operations on Monday will significantly improve the convenience of won transactions, and agreed to substantially strengthen round-the-clock monitoring to respond to volatility that may arise during overnight hours.

Participants also agreed to finalize and announce this month a "won internationalization roadmap" aimed at enhancing the convertibility of the won against foreign currencies and increasing the use of the won in current and capital account transactions.