Global asset manager Franklin Templeton said on the 17th that while Korea's stock market is vulnerable to the impact of rising prices and exchange rates stemming from a Middle East war, government policy and securing alternative energy could ease downside pressure on the market.
Christy Tan, investment strategist at the Franklin Templeton Research Center, said of the domestic stock market, "Korea relies on the Middle East for about 70.7% of its crude oil imports and 20.4% of its liquefied natural gas (LNG) imports, making its energy supply and demand particularly vulnerable," and noted, "If the energy shock is prolonged, it could weigh on economic growth and inflation, and pressure on the won's value could widen financial market volatility."
However, citing policy efforts by the government and strategic oil reserves as alternatives, Tan said "there is no need to assume an uncontrollable plunge." Earlier, the Korean government said it would mobilize all policy tools, including drawing up a supplementary budget and expanding a market stabilization program of more than 100 trillion won.
She added, "On the energy front, the Korean government is expediting the restart of six nuclear reactors and can flexibly operate coal-fired power generation depending on LNG supply conditions, and it plans to release 22.46 million barrels (208 days' worth) of strategic oil reserves in coordination with the International Energy Agency (IEA)," and assessed, "Korea is vulnerable to external shocks yet has practical buffers in place to defend against downside risks in the domestic market."