The South Korean government said that is soon likely to rescue small and medium-sized firms suffering huge losses from investing in knock-in, knock out (KIKO) options, Korea Herald reported Tuesday quoting the remarks from Kwon Hyouk-se, a standing commissioner of the Financial Supervisory Commission (FSC).
"Rescue efforts look possible, considering the government took the initiative during the 1997-98 financial crisis to save top venture firms from bankruptcy by fueling liquidity with the cooperation of KIBO Technology Fund and the Korea Credit Guarantee Fund," Kwon said.
The FSC would establish the measures in concert with the relevant government agencies, the official added.
His statement comes amid reports highlighting fears expressed by the Financial Supervisory Service (FSS) last week that many SMEs facing KIKO option-related losses.
The Financial Supervisory Service (FSS), said that 519 public traded companies lost around 1.7 trillion won (1.55 billion U.S. dollars) from KIKO trading as of end of June.
KIKO allows holders to sell dollars at a fixed exchange rate if the won moves within a certain range set out in the contract. However, if the exchange rate falls outside the predetermined range holder are forced to sell below the market rate.
Many South Korean companies expected the exchange rate to move within the range of low or mid 900 won. However, they are facing huge losses since the local currency moved opposite from their expectation, depreciating substantially against the U.S. dollar.
Source:Xinhua
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