S. Korea Heading for Black September’
A leading British daily says South Korea is heading for a “black September” due to Korean losses in U.S. investments and poor foreign exchange management.
The Times said Monday that although few are predicting a financial meltdown such as the one that hit the region in 1997, recent weeks have exposed some unique vulnerabilities in Asia’s third-largest economy.
According to the report, the Korean government’s heavy investments in Fannie Mae, Freddie Mac and other U.S.-related agency bonds have left a potentially huge liquidity problem upwards of 50-billion U.S. dollars in the foreign reserve portfolio.
The paper said some believe that Seoul might have no ammunition left to prevent a significant flight from the won.
The report said the situation could worsen dramatically, citing that six-point-seven billion dollars worth of Korean bonds mature this month, potentially creating vast downward pressure on the won if a large part of that sum immediately flees abroad.