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IBK employees line up at the lounge of its head office in central Seoul to deposit dollars in a symbolic gesture to encourage people to do the same to help the nation overcome the unusual dollar shortage. The won fell to a 10-year low of 1,395 won to the dollar. During the currency crisis in 1998, Koreans impressed the world by initiating a gold collection campaign to save the nation from unprecedented economic trouble.
/ Korea Times photo by Kim Ju-sung |
KOSPI Drops to 2-Year Low of 1,287
By Yoon Ja-young
Staff Reporter
The Seoul stock market plunged to a two-year low and the won plummeted to a decade low against the dollar, driving Korea's financial market into chaos.
The Korean won closed at 1,395 won to the dollar Wednesday, down 66.9 won from the previous day, and the lowest level since Sept. 23, 1998.
It started trading at 1,335 won, but massive buying of dollars pushed it up to 1,399 won.
Foreign investors selling stocks, coupled with the current account deficit, is pulling the value of the Korean currency, which has dropped 208 won against the greenback in four days. Foreigners have sold $33 billion in stocks so far this year, and the trade account is recording a $14.2 billion deficit. Concern over an economic slump is adding to a pessimistic outlook on the won. The rattled global financial markets, despite the bailout packages by the United States, is causing demand for liquidity in dollars ― considered a safety asset.
Market experts are showing concern as the won has lost over 40 percent of its value against dollar this year. In contrast, the yen, yuan and euro have strengthened against the greenback, while other Asian currencies such as those of Taiwan, Hong Kong, and Indonesia have changed little in value.
The foreign exchange market is panicking at even the slightest news, such as a North Korean missile test. North Korea-related news didn't have much impact on the market during the former President Roh Moo-hyun administration.
Analysts say that the market has lost confidence in the government. Strategy and Finance Minister Kang Man-soo has made remarks at various times favoring a weak won to boost exports, but later poured dollars into the market to pull down the rate as the economy began suffering from inflation.
``Instead of intervening in the market, the government should rather focus on stabilizing market sentiment to stop speculative demand,'' the Hyundai Research Institute said.
Deputy Strategy and Finance Minister Shin Je-yoon said the government has a contingency plan, which will deter demand, and plans to strengthen regulations on speculators in the currency market.
Stock prices returned to the level prevalent two years ago. The main index KOSPI closed at 1,286.69 Wednesday, losing 79.41 points, or 5.81 percent, from the previous day, the lowest figure since July 26, 2006, when it closed at 1,279.08.
The junior, tech-heavy Kosdaq market shed 30.48 points, falling 7.58 percent to close at 371.47, nearing the index of November 2004.
The Financial Services Commission said it is considering measures to stabilize the stock market, in which institutional investors will play a role.
chizpizza@koreatimes.co.kr
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