▲ The decision of whether Federal Reserve Board Chair, Janet Yellen, will raise the U.S. interest rate by December is approaching and Korea is preparing ahead of the possible hike.

[Special Economy=Eunji Kim]The possibility of the Federal Reserve raising the U.S. interest rate by December is looming and Korea is acting fast and preparing ahead of the probable hike.

For one, firms are issuing more bonds, now at a more profitable condition, before the raise.

Data shows that bonds that will be issued next week will record at 85 cases, totaling two trillion eight hundred and eight two hundred million won--the most since October.

Here, the most bonds that will be issued are for current income at two trillion and one hundred and fifty-eight two hundred million won, while bonds toward funds for equipment, conversion funds and other funds are each at 500 billion.

“Companies that originally planned to issue bonds next year are doing that now [when the interest rate is low so there is minimal payback on loans],”said Kim Sang-man, a team manager at Hana Financial Investment who analyzes assets.

Secondly, the dollar will strengthen after the interest rate is raised, which means Korea's export prices can have more competitiveness, increasing sales abroad and energizing the export industry. The country's exports this April has declined for four consecutive months--the worst in two years. But, that can change when the U.S. interest rate is raised. Anaylsts have referred to this as a "green light" for Korean exports. Now, the country is preparing to pursue more exports to gain more profit.

Next, Korea can lose foreign investors to the United States, as they are attracted by higher interest rates and safer assets. There's also the concern that foreign investors can break their assets in the Korean market, which can cause a bearish ripple.

Currently, these folks are on a trend of selling stocks at a rapid rate to, in one way, buy stocks from the United States if the interest rate is raised. From last August to this November, they sold stocks worth over 5 trillion won for 27 consecutive days. This has caused Korean stocks to tumble, as a result.


This has led Korea to think of measures that will attract back investors and stimulate the stock market, such as raising its own interest rate.


Other countries, too, especially developing nations, can consequently feel the pressure to raise their own interest rates to attract investors.

Right now, Korea has an interest rate of 1.5%--the lowest it has been recorded; there's a dilemma of whether to freeze, lower or raise it.

After the MERS outbreak this July, the country's economy is slowing back to recovery but the decision of what to do with the interest rate can push this progress backwards. If the interest rate is lowered, that can give rise to more zombie firms but if it is raised, stocks can tumble as an aftermath and firms can receive pressure to pay higher interests to investors and in another way, the export industry can shrink.

However, with all these taper tantrums considering, the government and the Financial Services Commission are advising to hold on to these concerns for now.

Since this move has been broadcasted for a couple of months, in contrast to an unprecedented act, Korea has already felt the effects, as previously shown whenever the Federal Reserve Board Chair, Janet Yellen, made a statement about the following topic.

Furthermore, according to some experts, the Korean economy is deemed sound enough to be able to lose funds and still be safe.


Morgan Stanley has even referred to a time when Korea experienced bullish impact after the hike by the United States in the past. In a statement, the global financial services firm said, "We should pay attention to when the United States raised interest rates during 1990 and between 2004 and 2006, then KOSPI rose each on average 7% and at 62%."

Whatever the aftermath, experts will now look into how Korea and its acts prior to the possible hike have helped the country prepare for the Fed's decision.


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