Finance Minister Yoon Jeung-hyun told a National Assembly audit on Tuesday the Korean financial authorities are "preparing various measures" to deal with an excessive inflow of speculative foreign capital. And Bank of Korea Governor Kim Choong-soo said, "We must control the inflow of speculative foreign capital that seeks to profit from the strengthening of the won."

More than W30 trillion (US$1=W1,128) worth of foreign capital entered the Korean stock and bond markets so far this year. As a result, the KOSPI has risen to the 1,900 point level, while bond yields have dropped to historic lows. The won strengthened rapidly over the span of just two months.

The U.S. continues to print dollars to boost its economy, while Europe and Japan are also racing to expand money supply, causing speculative capital to hunt for profits in emerging markets in Latin America and Asia. This has prompted emerging countries to change their policy from simply watching out for asset bubbles and inflationary pressures to actually blocking the influx of foreign capital.

Brazil raised taxes on transactions by foreigners from 2 to 4 percent earlier this month and bumped it up to 6 percent on Monday. Thailand has also begun taxing profits foreign investors make on bonds. They are trying to prevent another mass exodus of foreign capital that triggered the 1997 Asian financial crisis and the 2008 global financial meltdown.

Korea's financial markets are open and remain a prime target for speculative foreign capital to make quick profits. Policies to stem the tide must be made quickly. As the host of the G20 Summit, Korea cannot be seen t o intervene in the foreign exchange market at will. But it must be ready to implement controls on foreign capital that other countries are enforcing, including scrapping of tax breaks on profits from sovereign bond investments by foreigners. The country must not let its status as the host of the G20 Summit hinder its capacity to deal with a crisis.