Lee Min-hyung joined The Korea Times in 2014 and has worked as a journalist mainly in Korea’s finance, tech and automotive industry. He specializes in content creation, breaking news and in-depth analysis currently on transportation and mobility. You can reach him via mhlee@koreatimes.co.kr.
Stocks, currency plunge on panic selling
Dealers at Hana Bank work at a dealing room at its headquarters in Seoul, Thursday when KOSPI nosedived to close at 1834.33 won, down 3.87 percent from a day ago. The Korea Exchange also issued a five-minute sidecar after the KOSPI fell by more than 5 percent during trading hours. Yonhap
By Lee Min-hyung
Main bourse activates sidecar for 1st time in over 8 years
By Lee Min-hyung
Korea's benchmark stock index crossed into bear market territory Thursday on investors' selling spree after the novel coronavirus escalated into a global pandemic. The KOSPI opened with a 1 percent drop and closed at 1834.33, down 73.94 points or 3.87 percent from a day ago. The secondary Kosdaq market also finished with a bigger drop, declining by 5.39 percent to 563.49.
The escalating fear of the global spread of COVID-19 has pushed foreign investors to engage in a six-day-long selling spree of Korean stocks. They net sold shares worth 895.2 billion won ($742 million) on Thursday.
The Korea Exchange activated a sidecar for five minutes at around 1 p.m. on KOSPI after it fell by more than 5 percent. The measure was aimed at minimizing shocks amid market turbulence by temporarily blocking investors from trading stocks. This was the first time in eight years that the exchange halted trading.
The local currency lost ground against the U.S. dollar on lingering concerns over the pandemic. The won-dollar exchange rate closed at 1,206 won per dollar Thursday, up 13.5 won or 1.26 percent from the previous day.
With the World Health Organization making the pandemic declaration, major overseas stock markets have also taken a dive. Japan's Nikkei 225 index opened with a drop of 1.68 percent and plunged by more than 5 percent at one time Thursday. Hong Kong's Hang Seng Index was also down, as the pandemic fear weakened investor sentiment.
Market pundits suggested a mixed outlook on the likelihood of the main bourse making a short-term rebound.
“Investors should bear in mind that the KOSPI could fall further next week, as the growing pandemic fear will likely continue to pose a threat to the local economy which has already suffered from the slowdown,” Hwang Sei-woon, an economist at the Korea Capital Market Institute, said.
In general, the local stock market has declined by 30 percent from its previous high due to concerns over the pandemic and a resulting global economic slump, according to the expert.
“But the KOSPI has yet to plunge to that level, so my view is the Seoul bourse may suffer additional drops at least during the next few trading days,” he said.
Another economist at Meritz Securities, however, remained optimistic about a possible rally of the KOSPI next week.
“The pandemic fear has already been reflected in the recent KOSPI fall, so chances are slim that the main bourse will plunge further to any alarming level in the near future,” Kang Bong-joo from the securities firm said.
The brokerage house expected the benchmark index to bounce back to the low- to mid-1,900 range next week unless new confirmed cases of the virus surge in less-affected Western countries.
“Investors are engaging in a selling spree amid concerns that the pandemic impact could be even worse down the road,” he said.
The number of new confirmed cases in Korea and China, two of the most-affected countries from the virus, is starting to decline, he said.
“We need to keep an eye on how fast the virus spreads in the United States and Europe, but for now, it appears unlikely the pandemic will cast as bad an economic damage there as it has done in the Asian markets,” he said.