Korea is prepared to take action to stem market instability recently caused by falling bond prices, which sent the local stock market plunging for the second straight session, the country's top economic policymaker said Wednesday.

"We are closely monitoring market moves," Finance Minister Kim Dong-yeon told reporters after an economy-related ministers meeting. "We will take measures, if necessary." 

Like other global markets, the Seoul stock market has been shaken by a sharp hike in bond yields. At the close of play Wednesday, the country's benchmark stock index, the KOSPI, had fallen 56.75 points, or 2.31 percent, to 2,396.56, and the Korean won was trading at 1,086.60 against the US dollar, up 4.9 won from the previous session's close.

On Tuesday, the KOSPI shed 1.54 percent following a rout on Wall Street.

Foreigners and institutions sold a combined 929 billion won ($855 million) worth of stocks on profit-taking. Individuals bought a net 926 billion won worth of shares, keeping the KOSPI index from falling further.(Yonhap)