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.
KOSPI, large-cap cryptocurrencies teeter on US inflation fears
An electric board set up at a dealing room of Hana Bank in Seoul shows a decline of the benchmark KOSPI on Thursday when it closed at 3,122.11 points, down by 1.25 percent from the day before. Yonhap
By Lee Min-hyung
By Lee Min-hyung
The benchmark KOSPI and large-cap cryptocurrencies plunged Thursday on growing inflationary fears sparked by a surge in the U.S. consumer price index.
The main bourse here closed at 3,122.11 points, down by 1.25 percent or 39.55 points from the previous trading day. The drop was attributable to news that the U.S. index rose by 4.2 percent in April from the previous year. This was the highest growth in more than 12 years there.
The KOSPI widened volatility for the first few minutes after its opening when it plummeted about 2 percent and reached as low as 3,108.88 points. The secondary Kosdaq also closed at 951.77, down by 1.59 percent from a day earlier.
The nation's large-cap tech stocks ― such as Samsung Electronics, LG Chem and SK Hynix ― dropped within a range of 1 percent to 2 percent. Among the nation's 10 largest firms in terms of market capitalization, only three companies ― Samsung Biologics, Hyundai Motor and Celltrion ― enhanced their valuations slightly on the same day.
Stock markets from a number of influential economies around the globe tumbled amid widening inflation worries. The tech-heavy Nasdaq in the U.S. dipped 2.7 percent to 13,031.68. Stocks from major Asian economies such as China also declined amid the bigger-than-expected inflationary concerns.
The stock price of Samsung Electronics dropped by 1.87 percent and closed at 78,500 won ($69.49) on foreign investors' selling spree. Foreigner investors' net-selling of shares in the main bourse reached 1.44 trillion won on Thursday, according to the Korea Exchange.
“The Korean stock market will be affected by the inflation-related uncertainty at least for the next couple of months,” Korea Capital Market Institute economist Hwang Sei-woon said. “But we need to wait and see how serious the inflation level will be in the world's largest economy, which will determine the timing of the Fed's possible interest rate hike.”
Other analysts also said the U.S. inflationary fear would remain in place throughout this year, and the uncertainty will continue to spook investors in the global financial market.
“For this year, there stands a chance that prices in the U.S. will exceed the Fed's estimated level for a substantial period of time,” Daishin Securities economist Kong Dong-rak said. The Fed is also focusing on reducing the level of its monetary easing this year, and this change of stance raises the possibility of burdening the global financial market, according to the analyst.
Prices of major virtual assets ― such as Bitcoin and Ethereum ― were also on a roller coaster ride following reports over the looming inflationary challenges in the global assets market.
Tesla CEO Elon Musk's recent remarks that the company does not have plans to accept bitcoin payments also escalated cryptocurrency volatility. As of 11:35 a.m., bitcoin prices dropped to 64 million won, down by 9 percent from a high of more than 70 million won on Wednesday.
The U.S. inflation fear also resulted in the rise of the won-dollar exchange rate. The figure rose to as high as 1,133.3 won per dollar on Thursday morning. This was the first time the exchange rate topped the 1,130-won mark since April 1 this year.