By Park Hyong-ki
Staff Reporter
Seoul stocks are relentlessly heading toward a bottomless pit with the benchmark KOSPI losing vigor for seven trading days.
The KOSPI index plunged below the psychological important level of 1,600, closing down 28.60 points, or 1.78 percent, at 1,577.94. Meanwhile, the tech-heavy Kosdaq market shed 8.19, or 1.49 percent, at 538.30.
The biggest fall for the KOSPI this year was back in mid-March when it hit 1,574.44.
Analysts attribute the weeklong dismal performance to growing worries over inflation on soaring oil prices, recently surpassing $140 a barrel.
They say inflation poses a major concern among investors especially since the country's consumer prices hit a 10-year high in June.
Daewoo Securities analyst Cho Jae-hoon said, ``External negatives, including skyrocketing prices of oil, are further weighing down stock prices.''
In addition, foreign investors continued their net-selling, unloading shares worth over 260 billion won. They have sold Seoul shares totaling 1.3 trillion won as of this week.
This has attributed to the won further weakening against the U.S. dollar, losing 5.40 to close at 1,050.40 won. This is the first time in almost three years that the won-dollar rate has surpassed 1,050.
The weakening of the won may give Korean products a cost advantage overseas, but analysts project that this is less likely due to the global slowdown. Also, the weak won is making it harder for the country and its companies to buy and import oil and raw materials as it makes them more expensive.
Pundits note that the government has been mismanaging the foreign exchange market, saying that it has interfered too often to weaken the won, instead of leaving its value up to the market.
The government has intervened in the forex market to keep the won-dollar rate within the band of 1,020 won to 1,050 won, as a way to support export-oriented companies.
Forex dealers forecast the won-dollar rate will hit 1,060 won next week.
As for stocks, Kwak Jung-bo, an analyst for Hana Daetoo Securities, said, ``It'll be hard to see an immediate rebound in the near future.''
phk@koreatimes.co.kr