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.
Korean stocks plunge on coronavirus fears
Dealers at KEB Hana Bank work in front of electronic boards showing local stock market indexes and a don-dollar exchange rate in Seoul, Tuesday. The benchmark KOSPI closed at 2,176.72 points, down 3.09 percent from the previous trading day, amid fears that a coronavirus would rock the global economy. Yonhap
By Lee Min-hyung
Gold, US dollar strengthen amid spread of deadly virus
By Lee Min-hyung
Growing fears of the spread of the deadly Wuhan coronavirus jolted Asian stock markets, Tuesday, including the Seoul bourse, on foreign investors' selling sprees in the wake of an overnight fall on Wall Street.
The Korean won also lost much ground against the dollar as global investors flew to safe assets, such as the U.S. greenback and gold.
The benchmark KOSPI opened with a drop of 2 percent, as the virus produced volatility on the local stock market. The main bourse closed at 2,176.72 points, down 3.09 percent from the previous trading day.
The Kosdaq, the nation's secondary stock market, also reported a drop of 3.61 percent at its opening Tuesday. It closed at 664.7 points, down 3.04 percent or 20.86 points.
Japan's Nikkei 225 dropped by 0.55 percent to 23,215.71, while Indonesia's Jakarta Composite Index and Malaysia's Kuala Lumpur Composite Index shed about 1 percent and 1.2 percent, respectively.
The turbulence in Asia came after global stock markets tumbled a day ago, as investors became increasingly wary of the rapid spread of a deadly coronavirus.
The Dow Jones Industrial Average plunged 370 points, Monday, or 1.3 percent from the previous trading day. The tech-heavy Nasdaq Composite also reported a bigger drop of 1.5 percent during the same period, as the virus prompted investors to opt for safer options.
With the death toll from the respiratory virus jumping to over 100, governments here and abroad are declaring a public health emergency, which is sparking fears that the spread of the epidemic will send a shudder through the global economy and financial market.
Korean financial authorities are also on the lookout for potential economic damage from the virus.
Finance Minister Hong Nam-ki proffered a plan Tuesday to create a special budget of 20.8 billion won to spend on prevention measures for the virus.
“We are closely watching how much damage the global economy will suffer in the aftermath of the spread of the virus,” he said at an emergency meeting in Seoul.
He said the epidemic has yet to seriously influence the Korean economy, but the ministry would continue keeping a close eye on how the virus impacts the global and local financial markets.
The Bank of Korea (BOK) established a special taskforce to deal with the aftermath of the Wuhan virus.
BOK Governor Lee Ju-yeol ordered officials Tuesday to set up the team ― led by the deputy governor ― and closely monitor any potential impact on the Korean economy by liaising with the bank's overseas offices.
“The taskforce will operate around the clock and keep the relevant government authorities updated with the latest information on any unusual signs from the global financial market,” an official from the central bank said.
Market experts, however, remained optimistic that the local stock markets would recover from the shock in the long run and their momentum for growth will rekindle.
“The local stock markets are alternative options for those from China, so foreigners are expected to engage in a buying spree of local stocks in their bid to minimize risks from China,” Samsung Securities economist Seo Jung-hun said.
“The mid- to long-term outlook for the local markets will remain positive in that their growth has been driven by an improvement in the global trade environment,” he said.
While global stock markets reported drops, gold and the U.S. dollar, two of the representative safe assets across the world, have gained ground.
According to the New York Mercantile Exchange, gold was traded at $1,577.40 (1.85 million won) per ounce, Monday, up 0.4 percent or $5.5 from the last trading day, and the highest in six years since April 2013.
The U.S. dollar is also on track to strengthen its value against the Korean won. The won-dollar exchange rate jumped to close at 1,176.7, Tuesday.