South Korea plans new crisis measures

By Yoo Choonsik and Park Jung-youn

SEOUL (Reuters) - South Korea is working on fresh steps to cushion the economy from the global credit crisis and to build on signs of a tentative return of investor confidence that carried the stock market to a record rally this week.

Authorities have already put together packages worth some $135 billion, to support banks and builders, and sharply cut interest rates to try to shelter the economy from the financial storm unleashed by Wall Street last month.

The Finance Ministry said it would release details about the stimulus measures, widely expected to be focused on the construction industry, on Tuesday.

The measures would include 9 trillion won ($7.3 billion) of additional government spending, the Maeil Business Newspaper said on Thursday.

South Korea is also considering guaranteeing foreign currency deposits, Shin Je-yoon, the deputy minister of international affairs at the finance ministry, told a radio program.

A raft of data on Friday underlined the impact on Asia's fourth-biggest economy from a global downturn where the economies of the United States, Britain, Japan and the euro zone are all contracting.

Industrial output in the export-driven economy fell in September for the third month running, marking the longest spell of contraction since early 2001.

Consumer goods sales fell a seasonally adjusted 3.8 percent in September, the sharpest decline in three months, and a central bank survey showed manufacturing sentiment was its gloomiest since 2003, when the survey began.

"The output figures are all grim, including inventories, consumption and investment. We may see a further slowdown down the road," Park Sang-hyun, an economist at HI Investment & Securities, said of the September figures released on Friday.

RECORD RALLY

Seoul's financial markets ended mixed on Friday but the stock market closed the week up a record 18.5 percent, while the won finished the week up 10.3 percent against the dollar, the biggest since January 1998.

That marked a dramatic turnaround from last week when stocks suffered their biggest fall in a week and the won ended at a 10-year closing low in local trading.

"There were sighs of relief as worries about dollar liquidity had been one of the main reasons for the market's freefall earlier this month," said Jun Ji-won, a stock analyst at Kiwoom.Com Securities.

"This is good time for buying domestic stocks cheap, with good upsides with solid potential gains in the won," Jun added.

Investor sentiment was boosted this week by a record rate cut of 0.75 percentage point to 4.25 percent on Monday, taking rate cuts for October to 1 percentage point.