U.S. rate hike not to cause foreign capital exodus from S. Korea: report

The expected interest rate hike in the United States will unlikely cause a massive exodus of foreign capital out of South Korea, thanks to the larger size of the economy, improved financial conditions and financial safety net, Seoul's central bank data showed on Tuesday.

The Bank of Korea (BOK) said in a biannual monetary policy report submitted to the National Assembly that it has a low possibility for the U.S. Federal Reserve's rate hike to cause an abrupt foreign capital outflow from the nation and greatly expand financial instability.

The report said emerging markets, including South Korea, strengthened a capability for responding to foreign funds outflow given the bigger size of emerging economies, the improved financial soundness and the financial safety nets, such as currency swaps with many partners.

South Korea's foreign currency reserves kept rising and its economic fundamentals were improved sharply relative to other emerging economies, the report said.

The ratio of the country's foreign reserves to foreign debts continued to increase from 26.3 percent to 28.3 percent in 1990s to 79.7 percent during the 2009-2013 period.

The Fed is widely expected to raise its policy rate as early as December this year, for the first time since the 2008 global financial crisis.

Foreign ownership of local securities, including stocks and bonds, reached 728.7 billion U.S. dollars as of the end of 2014, nearly tripling 254.3 billion dollars tallied in June 2004.

The BOK said in the report that it will keep an accommodative monetary policy stance amid external uncertainties like the alteration in the U.S. monetary policy and economic slowdown in emerging economies. Enditem