By Lee Hyo-sik
Staff Reporter
Seoul stocks plunged sharply across the board Friday as investors went on a selling spree, spooked by Dubai's request for a six-month moratorium on debt worth billions of dollars.
The Korean won also lost ground sharply against the greenback as foreign investors became risk averse, dumping local shares amid increasingly jittery global financial market conditions.
The benchmark KOSPI tumbled 75.02 points, or 4.7 percent, to 1,524.50, marking the largest decline since Nov. 6, 2008, when the index fell 89.28 points as the nation began feeling the effects of the global credit crunch.
Turnover was moderate at 380.4 million shares for 5.38 trillion won, with losers outnumbering winners 785 to 68.
The tech-heavy Kosdaq also lost 22.15 points, or 4.67 percent, to close at 451.67.
The won weakened against the dollar as foreigners sold local shares and converted the money into dollars before taking it out of the country.
The local currency closed at 1,175.5 won against the greenback, down 20.2 won, the first time it has closed above the 1,170 level since Nov. 5 when the rate was 1,179.8 won.
Other Asian markets also closed sharply lower due to worsening investor sentiment. Japan's benchmark Nikkei average slid 301.72 points, or 3.22 percent, to close at 9,081.52.
Overnight, European markets across the continent were hit hard by the bad news from the Middle East the previous day. France's CAC40 index tumbled 3.41 percent to close at 3,679.23 on Thursday, while Germany's DAX30 index dropped 3.25 percent to 5,614.17. The U.S. stock market was closed for the Thanksgiving Holiday.
On Wednesday, Dubai World, a state-owned holding company in the United Arab Emirates (UAE), called for a six-month repayment moratorium on debts worth some $60 billion.
The UAE government said it will adjust the financial debt and enhance the company's efficiency. But this failed to calm investor sentiment and it witnessed its credit default swap (CDS) rate skyrocket, meaning the Middle Eastern nation has to pay much higher premiums to borrow money on the global financial market.
Analysts here say that investors, particularly foreigners, panicked over Dubai World's failure to service its debts, sending the KOSPI plunging at a rate unseen for more than a year.
``Even before this incident, there was weak buying momentum on the local bourse. This bad news from the UAE prompted foreign investors to dump local shares. But retail investors went bargain hunting for blue chips, mitigating the KOSPI's fall,'' a Daishin Securities analyst said.
He said domestic builders, particularly those heavily exposed to the Middle East, have been hit hard, and if the Dubai debt problem spreads to the rest of the world, there will be a series of order cancellations and they will likely sustain heavy losses.
``Additionally, financial shares took a heavy beating. But we do not expect the global financial sector to deteriorate to the level following the collapse of Lehman Brothers in September 2008. We do not think the KOSPI will fall below 1,500. But it will likely move to between 1,500 and 1,600 for the remainder of the year.''
Samsung C&T saw its share tumble 8.14 percent to close at 43,450 won from the previous day's trading, while shares of Daewoo Engineering & Construction fell 8.3 percent to 11,600 won.
Financial stocks were another big loser, with KB Financial Group nose-diving 7.08 percent to 56,400 won. Shares of Shinhan Financial Group declined 6.26 percent to 44,150 won.