South Korea's financial authorities launched an emergency market check after a sharp fall in local stocks. They urged financial companies to refrain from indiscriminate credit provision and to strengthen risk management. They also decided to prepare to swiftly implement contingency plans if market unease widens.

The Financial Services Commission said on Wednesday it held an emergency meeting on stock market conditions chaired by Financial Services Commission Chairman Lee Eok-won (이억원), with related agencies including the Financial Supervisory Service and the Korea Exchange and market experts taking part.

Participants included the Financial Supervisory Service, the Korea Exchange, the Korea Securities Depository, Korea Securities Finance Corp, the International Finance Center, the Korea Capital Market Institute, the Korea Financial Investment Association and officials from the research centers of KB Securities and Shinyoung Securities.

Participants said stock market volatility had increased due to expanding expectations for U.S. interest rate hikes, uncertainty over investment and profitability in artificial intelligence (AI) semiconductors and rising international oil prices. They also said the market may have overreacted in terms of the recent pace of decline and supply-demand conditions.

They said the fundamentals of the domestic economy remained solid, including performance in key industries such as semiconductors, defence and shipbuilding, foreign exchange reserves, the current account balance and the soundness of financial institutions.

Financial authorities and related agencies agreed to stay alert to heightened volatility while guarding against the spread of excessive anxiety and sharp herding. They said investors also need to consider companies' intrinsic value and mid- to long-term growth potential.

They will also strengthen monitoring for market-disrupting activity. Financial authorities decided to closely watch domestic and overseas markets and supply-demand trends and respond under a zero-tolerance principle to the spreading of false rumours, price manipulation and illegal short selling that exploit market unease.

They will also strengthen advance preparations to swiftly implement contingency plans if necessary depending on market conditions.

Lee said, "Please respond proactively to financial market stability and investor protection with vigilance even toward small volatility."

He also issued a warning about credit-based investing as stock market volatility has rapidly expanded recently.

Lee said, "Investing that relies on excessive debt and credit is risky, and risk management is important especially at times like this," adding, "Financial companies should refrain from indiscriminate credit provision and do their utmost in customer protection and risk management."