South Korean Markets Surge in Early Trading

South Korea’s battered financial markets surged in early trading today, the first day of market activity since an international decision to expedite delivery of promised rescue funds.

Minutes after the Korea Stock Exchange opened, the benchmark index rose 7.2%, or 25.22 points, to 376.67. The index closed the morning session at 375.63.

The Korean currency, the won, started sharply up at 1,400 against the dollar, compared with 1,836 at Wednesday’s close. It closed the morning session at 1,526.

The markets were closed Thursday for Christmas.

Meanwhile in Tokyo, stock prices advanced Thursday on growing optimism that a taxpayer-funded bailout will nurse Japan’s financial industry back to health. The dollar rose against the yen.

The dramatic turnaround in South Korea’s markets was fueled by an agreement by the International Monetary Fund and the Group of 7, a grouping of the world’s leading industrialized nations, early Thursday to provide South Korea with $10 billion in emergency loans by early January.

The money--$2 billion from the IMF and $8 billion from the United States, Japan and five other industrialized countries--already had been committed to South Korea as part of a record $60-billion bailout package negotiated early this month.

Pressed by the need to curb spreading fears that the world’s 11th-largest economy, with rapidly dwindling foreign reserves, may crumble, the IMF and the G-7 countries decided to provide the money far ahead of schedule.

“Fears of a national moratorium have disappeared in the market. This could be the beginning of a rapid market recovery,” said Baek Jung Hyun, an analyst at Samsung Securities Co.

“Now the question is whether U.S. and other foreign banks will roll over their loans to South Korea. But we can be cautiously optimistic that they will follow suit, since their governments are extending loans,” he said.

The won dropped to an all-time low of nearly 2,000 won against the U.S. dollar early this week after losing almost 60% of its value in the past two months.

Announcing the decision by the IMF and G-7 at a hastily called news conference, South Korean Finance Minister Lim Chang Yuel declared that “the worst situation is over.”

Lim said the new funds will increase South Korea’s “usable” foreign currency reserves, which stood at $8.7 billion Wednesday, to $15 billion--enough to meet the country’s debts due in the next week.

But many analysts warned that it’s still too early to be optimistic, noting that South Korea has about $20 billion in short-term loans due within the next two months.

In Tokyo, the benchmark 225-issue Nikkei stock average rose for a second straight day, gaining 375.12 points, or 2.51%, to close at 15,300.10. On Wednesday, the average advanced 125.58 points, or 0.85%.

“The stock market is finally reacting to a series of government measures to stabilize the financial system,” said Sachio Ishikawa, general manager of the stock division at Chuo Securities Co.

Prime Minister Ryutaro Hashimoto’s governing coalition agreed Wednesday to add further to a bailout package that now earmarks a total of $231 billion in public funds for bolstering the banking system. In addition, the Finance Ministry has decided to ease requirements to shore up banks’ capital reserves.