January 8, 2009 / 9:57 AM / 11 years ago

South Korea detains financial "prophet of doom"

SEOUL (Reuters) - South Korean prosecutors have detained a self-styled financial market prophet who had a large following on the Internet but whose gloomy predictions upset the government battling an economic slump, they said on Thursday.

As South Korean markets tumbled late last year amid the global downturn, the main financial regulator warned it would crack down on what it considered malign rumours and some economic analysts say they have come under pressure from officials not to voice negative views on the economy.

“Minerva, a 30-year-old suspect, was detained on suspicion of spreading false information,” a senior prosecutor at the Seoul District Central Prosecutors’ Office told Reuters, identifying the man only by his Internet name but giving no details of the allegations.

In his blog, Minerva — who has never revealed his identity — had said he once worked in the financial field in the United States. The prosecutor said he was currently jobless, and they would not identify unless charges were laid.

He became a household name last year for his predictions of sharp falls in the won and local stock market and the collapse of the U.S. investment bank Lehman Brothers. The South Korean currency fell 28 percent last year and the main share index slumped 40 percent.

He later stopped making predictions, saying the authorities had muzzled his blog which attracted hundreds of thousands of visitors (here p_id=1&page_size=&page_no=1). The manager of one brokerage firm in Seoul, who asked not to be identified because of the sensitivity of the subject, said Minerva had become influential enough to deter some investors from buying South Korean shares.

The government has turned increasingly sensitive to negative reports on the economy, one of the hardest hit in Asia by the global financial crisis.

And a leading industry group, the Korea Securities Dealers Association (KSDA), is currently investigating ‘sell’ recommendations by foreign brokerages, including Morgan Stanley, Goldman Sachs, JPMorgan and Merrill Lynch, officials said.

Local economists and analysts said officials from the government and central bank have asked them not to make negative comments to the media on the economy and markets.

“A few months ago, I got a phone call from a senior Bank of Korea official because I expressed worries about the foreign exchange reserves in a local newspaper,” an economist at a local brokerage told Reuters, asking not to be identified.

“The official said that I would be responsible for a (potential) crisis if media keep reporting negative views..”

Editing by Jonathan Thatcher and David Fox

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