Stocks Tumble Amid Recovery Doubts
By Cho Jin-seo
Staff Reporter
Financial markets in Korea shared the pain with European and American bourses Friday, as the KOSPI lost 3.05 percent while the value of the Korean won fell to its lowest against the dollar in more than a month.
The tumble of stock markets worldwide showed that investors still have doubts about the global recovery, and the South Korean economy is no exception despite being relatively healthy.
After big drops on European and American stock markets overnight, the KOSPI started the day in gloomy territory.
Most stocks started 2 to 3 percent down from Thursday. The index closed at 1,567.12, down 49.3 points. The exchange rate rose to 1,169.90 won per dollar, up 19 won, as investors sought less riskier assets in dollars and bonds.
The tech-heavy Kosdaq also fell by 3.65 percent to end at 497.37. As investors veered toward safer assets, bond prices remained strong.
A flood of bad news hit the market overnight, including the unexpected increase in the number of Americans filing for unemployment benefits, and rising debt levels in several European countries. The Eurozone risk is looming as PIGS (Portugal, Ireland, Greece and Spain) economies falter, a Seoul analyst said.
The fear spread fast. The Dow Jones index fell 268 points, its biggest drop in seven months, and briefly traded below 10,000 for the first time since Nov. 6, according to AP.
In Asia, Japan's Nikkei 225 lost 2.6 percent, and China's Shanghai Composite Index fell 1.8 percent. Hong Kong's Hang Seng fell 2.9 percent, while the Taiwan bourse lost 4.3 percent.
Investors began pulling money out of emerging markets and commodities because they have become concerned about the fiscal health of Greece, Spain and Portugal, analysts said. On the KOSPI, foreigners net sold stocks valued at 290 billion won.
"We are getting into a situation where stimuli are needed to sustain growth but governments may not be able to finance them," Dariusz Kowalczyk, chief investment strategist for SJS Markets in Hong Kong, was quoted as saying by AP.
"If the American economy does not get worse, the dollar will remain strong for some time," an official at Korea Exchange Bank said.
This marks the third Friday in a row that the stock market has suffered a big drop. On Jan. 22, the KOSPI lost 2.19 percent after Barrack Obama announced his plans to regulate commercial banks.
A week later on Jan. 29, the index fell 2.44 percent on the rise of the so-called G2 risk from the United States and China.