By Kim Da-ye
Fears among foreigners concerning the slowdown of the global economy permeated institutional investor sentiment, bringing down the Seoul bourse Friday.
The benchmark KOSPI crashed 115.7 points or 6.22 percent, closing at 1,744.88. The loss is the biggest this year and the third largest in the history of the Korea Exchange (KRX) — the record was the 126.5-point loss on Oct. 16, 2008, a month after investment bank Lehman Brothers’ filed for bankruptcy protection.
The bourse’s market cap dropped under the 1 quadrillion plateau at 985.51 trillion won for the first time since Sept. 13, 2010.
“Concerns over a double-dip recession in the U.S. are spreading, and Morgan Stanley cut down last night its forecast for the world’s economic growth rate,” said Kang Hyun-cheol, a strategist of Woori Investment & Securities. “The deterioration of the U.S. macroeconomic indicators now makes investors think it could negatively affect Korean exporters.”
Kang pointed out that the selloff of Korean shares was led by foreigners last week, but this week, domestic institutional investors headed the selling spree.
On Friday, institutional investors net-sold stocks worth 313.4 billion won — more than 261.3 billion won dumped by foreigners — while individual investors picked up 164.7 billion won.
Institutional investors unloaded shares worth 193.8 billion won Tuesday, 19.7 billion won Wednesday and 327 billion won Thursday.
Even the relief pitchers of the stock market, mainly the pension funds, didn’t help guard the fast-plunging market, net-buying stocks worth merely 2 billion won.
The Seoul bourse opened in a dampened mood at 1,789.78 as the Dow Jones industrial average had plummeted 3.68 percent and the German and French bourses tumbled 5.82 percent and 5.48 percent, respectively.
While Morgan Stanley cut down the 2011 global GDP growth forecast to 3.9 percent from 4.2 percent, new data shows 408,000 Americans applied for unemployment benefits — the highest level in four weeks.
After a brief rebound in the morning, things gradually went downhill to the lowest level at the end of trading hours.
Both the major stock market and the smaller, tech-heavy KOSDAQ market had to halt algorithm trading for five minutes due to excessive falls in stock prices.
The Korean won lost 13.4 won, closing at 1,097.4 won against the U.S. dollar, while the yield on three-year government bonds dropped 0.03 percentage points to 3.53 percent.