South Korea's government has pledged massive cash support for venture firms to ease a liquidity crisis caused by financial market turmoil.
Finance and Economy Minister Jin Nyum told South Korean television late Saturday that four trillion won ($3.5 billion) would be poured into venture firms for three months from October.
"The money will be used to guarantee their payments," Jin said, admitting the industry had been plunged into crisis by a crash in the KOSDAQ technology-heavy second stockmarket.
The KOSDAQ index hit a new low for the year to close at 76.46 on Friday, reflecting a prolonged dotcom crisis that started in March following the slump by the US venture index NASDAQ.
The index has shed 73 percent since it hit 283.44 points at its peak on March 10, forcing high-tech firms to sell shares even below face value.
Jin hoped the government move would stabilize KOSDAQ. Analysts, however, said the hi-tech stockmarket would remain under heavy pressure, taking its cue from the movement of US markets.
"The KOSDAQ market has lost self-sustainability and has become very vulnerable to the movements of the main market and NASDAQ," said Daihan Investment Trust Securities analyst Kim Dae-Youl.
Many dotcom firms in South Korea, Asia's leading Internet user, are on the verge of collapse, with venture capitalists refusing more cash.
Most of the 589 firms on KOSDAQ have cancelled their business plans because they cannot raise new capital. Scores more unlisted firms have closed.
Analysts have said the crisis was caused by the NASDAQ crash, a rush of initial public issues and bearish financial markets.— (AFP)
© Agence France Presse 2000
© 2000 Mena Report (www.menareport.com)
