South Korea's financial watchdog said Thursday that emerging market turmoil is unlikely to develop into an all-out crisis although some emerging nations will suffer from foreign capital flights on U.S. stimulus cut speculation.
The Financial Services Commission (FSC) said that until uncertainty over the Federal Reserve's monetary stimulus tapering is settled, market jitters are likely to continue even as a possible full-blown contagion is seen as limited.
Some emerging countries, including India and Indonesia, are suffering from foreign capital flight and currency depreciation, sparked by an expected tapering of U.S. stimulus measures.
Market players are betting on the view that the Fed will decide to begin tapering the US$85 billion monthly bond purchases at its policy meeting slated for Sept. 17-18.
South Korea is differentiating itself from such troubled emerging markets as its economic fundamentals remain sound on the current account surplus run and the accumulation of foreign exchange reserves.
"But as major emerging markets remain sluggish, Korea needs to brace for possible long-term unrest in the global financial markets and emerging countries," the FSC said in a statement.
The watchdog expressed concerns that if Seoul's exports to emerging nations slow down, it is feared that the local economy might take a hit.
The FSC also said that there is the need to brace for a possible hike in oil prices, given the possibility of a U.S. military strike on Syria although it does not see a high chance for prolonged tensions.