By Kim Jae-won
Seoul stocks are expected to take a severe beating this week on growing geopolitical risks following North Korea's launch of a rocket, and weaker global bourses over concerns of sluggish growth in China and tumbling oil prices, analysts said Wednesday.
Japan's Nikkei 225 dropped 2.31 percent to 15,713.39 Wednesday, going below the 16,000 line for the first time in 16 months, after falling 5.4 percent the previous day. The Dow Jones Industrial Average fell 12.67 points, or 0.08 percent, to 16,014.38, Tuesday, after plunging 1.09 percent Monday. The Seoul bourse was closed due to the Lunar New Year holiday.
Analysts said it is inevitable the local stock market will fall because investors will flock to safer assets amid the market's gloomy outlook. The Seoul stock market resumes today after a five-day break.
"Seoul stocks will suffer falls this week following steep drops in major indices in developed markets during the holiday," said Lee Jong-woo, head of IBK Securities' research center. "Concerns over crises in emerging economies and sluggish growth in the U.S. are weighing down on the markets."
He said geopolitical concerns will further weaken investor sentiment.
"Fears of additional big drops are spreading among investors, hurting their sentiment a lot," he said.
Bank of Korea Governor Lee Ju-yeol also expressed concern that volatility will increase in local financial markets, reflecting weak international stock markets during the holiday. He said it will take some considerable time before international financial markets stabilize.
"We will monitor the markets carefully and will engage in stabilizing them along with the government, if the volatility increases excessively," Lee said in a speech during an emergency meeting.
The chief central banker said three factors — the uncertain Chinese economy, additional drops in international oil prices and worries over a sluggish global economy — are driving investors to safer assets, pulling down stocks globally.
Lee said the trend will continue to weigh on Korea's financial markets because it will be hard to resolve the bad factors quickly.
The government said it will roll out market stabilization efforts if uncertainties increase in the markets, following the provocation from North Korea, though it downplayed the impact.
On Sunday, the North launched a rocket carrying the Kwangmyongsong-4 satellite that experts viewed as a cover for testing its intercontinental ballistic missile technology.
Finance Minister Yoo Il-ho said the deployment of the advanced U.S. missile defense system in the South to deter Pyongyang's provocations will not negatively affect the economy.
Seoul and Washington have begun discussions on the placement of the terminal high altitude area defense (THAAD) system, which may provoke China.
"While countries may face difficult tensions, the economy always has its own routine," said Yoo. "When South Korea faced disputes with Japan, their economic relationship remained intact. The economy is something we can think of separately."
The North's move immediately led South Korea to speed up talks with the U.S. on the deployment of the THAAD system, to which China, a key ally of North Korea, expressed strong opposition.
Seoul stocks are expected to take a severe beating this week on growing geopolitical risks following North Korea's launch of a rocket, and weaker global bourses over concerns of sluggish growth in China and tumbling oil prices, analysts said Wednesday.
Japan's Nikkei 225 dropped 2.31 percent to 15,713.39 Wednesday, going below the 16,000 line for the first time in 16 months, after falling 5.4 percent the previous day. The Dow Jones Industrial Average fell 12.67 points, or 0.08 percent, to 16,014.38, Tuesday, after plunging 1.09 percent Monday. The Seoul bourse was closed due to the Lunar New Year holiday.
Analysts said it is inevitable the local stock market will fall because investors will flock to safer assets amid the market's gloomy outlook. The Seoul stock market resumes today after a five-day break.
"Seoul stocks will suffer falls this week following steep drops in major indices in developed markets during the holiday," said Lee Jong-woo, head of IBK Securities' research center. "Concerns over crises in emerging economies and sluggish growth in the U.S. are weighing down on the markets."
He said geopolitical concerns will further weaken investor sentiment.
"Fears of additional big drops are spreading among investors, hurting their sentiment a lot," he said.
Bank of Korea Governor Lee Ju-yeol also expressed concern that volatility will increase in local financial markets, reflecting weak international stock markets during the holiday. He said it will take some considerable time before international financial markets stabilize.
"We will monitor the markets carefully and will engage in stabilizing them along with the government, if the volatility increases excessively," Lee said in a speech during an emergency meeting.
The chief central banker said three factors — the uncertain Chinese economy, additional drops in international oil prices and worries over a sluggish global economy — are driving investors to safer assets, pulling down stocks globally.
Lee said the trend will continue to weigh on Korea's financial markets because it will be hard to resolve the bad factors quickly.
The government said it will roll out market stabilization efforts if uncertainties increase in the markets, following the provocation from North Korea, though it downplayed the impact.
On Sunday, the North launched a rocket carrying the Kwangmyongsong-4 satellite that experts viewed as a cover for testing its intercontinental ballistic missile technology.
Finance Minister Yoo Il-ho said the deployment of the advanced U.S. missile defense system in the South to deter Pyongyang's provocations will not negatively affect the economy.
Seoul and Washington have begun discussions on the placement of the terminal high altitude area defense (THAAD) system, which may provoke China.
"While countries may face difficult tensions, the economy always has its own routine," said Yoo. "When South Korea faced disputes with Japan, their economic relationship remained intact. The economy is something we can think of separately."
The North's move immediately led South Korea to speed up talks with the U.S. on the deployment of the THAAD system, to which China, a key ally of North Korea, expressed strong opposition.
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