South Korea’s benchmark KOSPI plunged Tuesday by three percent to close at 2,176, marking the sharpest fall in 15 months.
Stocks were down across Asia, including Japan, after Wall Street fell overnight amid fears the coronavirus outbreak could hurt China's economic growth and the global travel industry.
Markets in China and Hong Kong were closed for the Lunar New Year.
The governor of the Bank of Korea has called for the creation of special task force to monitor financial markets 24/7 and share information with the government.
At an economy-related ministers' meeting Tuesday morning, South Korea's finance minister said the government will use around 18 million U.S. dollars of emergency funds set aside for tackling epidemics for this year's budget for quarantine operations and treatment.
"The government will also closely monitor the effect of the new coronavirus on South Korea's economy, particularly the real economy, and help minimize its negative impact."
He added the government will take cues from past cases, including SARS in 2003, the Middle East Respiratory Syndrome, or MERS, in 2015 to address the possible economic impact on South Korea's tourism and services sectors.
Major South Korean companies that have operations in China have introduced measures to protect their employees from potential infection.
Hyundai Motor Group plans to evacuate the families of hundreds of their employees in China to South Korea while allowing its employees in China to work from home.
The automaker added that it will provide over two million dollars in support such as medical supplies to Wuhan, where the virus originated.
Samsung Electronics, which has a semiconductor plant in Xi'an, is restricting its employees' business trips to China.
LG Electronics has banned travel to China completely and SK Hynix has banned its employees from making business trips to Wuhan.
Kim Hyesung, Arirang News.