Pessimism Back on Global Markets
By Kim Tae-gyu
Staff Reporter
While optimists proclaim that the worst is behind us in the ongoing financial distress, most people retain some uneasiness in the innermost recesses of their hearts.
A grim report from the World Bank released Tuesday struck a chord with the deep-seated skepticism, causing people to sell off stocks as well as commodities across the world.
The World Bank predicted that the global economy would contract 2.9 percent this year, much worse than its previous estimate of 1.7 percent. The Washington-based organization also downgraded next year's growth forecasts by 0.3 percentage points to 2 percent.
The global financial markets responded instantly, including those in Korea. In addition, concerns arose that pessimism might be returning to the markets.
The benchmark KOSPI plummeted 39.17 points, or 2.8 percent, to close at 1,360.54 and the tech-loaded Kosdaq dipped 15.1 points, or 2.94 percent, to 498.03.
The Kosdaq fell below the 500-point mark for the first time since April 29, when the junior index wrapped up at 494.47.
The value of the domestic currency also went down as the won-dollar exchange rate rose for the fifth consecutive sessions to end at 1,290.5 won per dollar.
``We have already been accustomed to seeing upgrades of economic forecasts over the past several months. But the World Bank chilled the atmosphere, disappointing investors once and for all,'' Shin Young Securities analyst Kim Se-jung said.
``Pessimism seems to have made a return to the market. At the moment bearish sentiment runs amok in the Seoul bourse. In my view, the market is likely to further head downward and the 1,300 mark might be broken in the near future,'' he said.
International stock markets, particularly in the United States, also faced a crash.
The 30 blue-chip Dow Jones Industrial Average dipped 2.4 percent overnight and the broader S&P 500 pared 3.1 percent. Tech-heavy Nasdaq composite index also fell 3.4 percent.
The crude oil prices as well as the values of other commodities including gold were substantially eroded by the bleak forecasts of the World Bank.
``The bottom line is that hopes for the early recovery deteriorated due to the World Bank report,'' a Seoul analyst said.
``The financial markets will not suffer setbacks similar to those of late last year or of March this year. But we might experience a mini-crisis,'' he said.