KOSPI fails to defend 2,000-mark amid virus crisis

Dealers at Hana Bank watch computer monitors in a dealing room at its office in Seoul, on Feb. 27. The Seoul bourse fell below 2,000 points on Friday amid rising concerns over the novel coronavirus. Yonhap

By Lee Min-hyung

The benchmark KOSPI failed to defend the symbolic 2,000-mark on Friday for the first time in six months amid growing concerns over the rapid spread of the novel coronavirus here.

The Seoul bourse opened with a drop of 1.7 percent before closing at 1,987.1, down 3.3 percent from a day ago, according to the Korea Exchange (KRX). The secondary tech-heavy Kosdaq also dropped to close at 610.7, down 4.3 from the previous trading day.

The plunge was widely expected in line with global stock falls. On Thursday, the Dow Jones Industrial Average recorded the biggest one-day decline to 1,191 points ― a drop of 4.4 percent ― as rising worries about the global spread of the virus weakened investors' confidence.

On the domestic front, KOSPI rode on a downward cycle, with foreign investors engaging in a days-long selling spree of Korean stocks amid escalating fears of COVID-19.

Analysts expect the KOSPI to post a further decline if the virus threat continues for longer than expected.

“Market volatility will deepen for the meantime due to weakening investor sentiment surrounding the coronavirus and its impact on the local stock market,” Samsung Securities analyst Moon Dong-yeol said.

If the virus-spread continues over a long period of time, KOSPI is likely to fall to below 1,950, according to the analyst.

Even leading stocks whose fundamentals remain solid cannot dodge the virus fears. Samsung Electronics, the nation's largest firm by market capitalization, also fell to close at 54,200 won ($44.58), down 3.04 percent from the previous day.

The company, whose valuation had been on the rise until the January virus headlines, had been considered one of the few stable stocks.

But the analyst urged investors not to be swayed by the recent market fluctuation, and instead to focus their investment on promising stocks in industries such as semiconductors, hardware, software and healthcare.

“Most players in the sectors are the leading stocks with solid earnings momentum, so it is not advised for investors to shift their portfolio into other areas in this unexpected adjustment period,” he said.

Stocks hit hardest by the virus crisis were ones in the financial sector, according to Meritz Securities.

“The KRX banking index has so far posted a drop of 14.2 percent, compared to Jan. 20 when the first case of the virus was reported,” Eun Kyung-wan, an analyst at the brokerage house, said. The index consists of nine leading bank stocks here.

This is the highest level of decline among all KOSPI-listed industry sectors, the analyst said. Fears over the coronavirus have raised calls for a key interest rate cut, and this has created a sense of concern over a potential earnings decline among major lenders here, he said.

Despite the fluctuation, the foreign exchange market did not show any volatility. The won-dollar exchange rate closed at 1,213.7 won per dollar on the same day, down 3.5 won from a day earlier. Beginning mid-February, the U.S. dollar gained stronger ground against the won, in-line with the virus-driven market uncertainty.