South Korea Will Bail Out Brokerages

South Korea will lend its brokerages up to $372 million in an unprecedented bailout. A string of bankruptcies and the impending collapse of Kia Group has shaved off one-fifth of the value of the benchmark stock index since late June, and interest rates have been rising. Deposits at brokerages, a key source of cash, declined to $2.75 billion this week from this year’s high of $3.85 billion won in late June. “We decided to take an extraordinary action to curb rising lending rates,” said Seo Young Shik, an official at the central bank. “Kia’s crisis is disturbing the capital markets, pushing higher lending rates and denting the stock market.” The cash injection will be through the Bank of Korea’s purchase of public bonds with a nine-day repurchase agreement from local brokerage houses in an open bid, the central bank said. Overnight lending rates stood at 14.20% on Wednesday, near the year’s high.