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| Electronic signboards in a dealing room at Hana Bank in Seoul show that the benchmark KOSPI fell 2.18 percent to 2,426.89 points, while the Korean currency slid 19.1 won to close at 1,350.4 per dollar, Monday. Yonhap |
KOSPI dips 2.18%; won-dollar rate soars by 19.1 won to 1,350.4
By Lee Min-hyung
Korean stocks tumbled and the local currency weakened sharply on Monday after U.S. Federal Reserve Chairman Jerome Powell warned of a prolonged monetary tightening at the Jackson Hole economic symposium over the weekend, sending shockwaves through the U.S. stock markets.
Local stocks dipped by more than 2 percent on the first day after the economic symposium. The benchmark KOSPI closed at 2,426.89, a drop of 2.18 percent from the previous trading day, as foreign and institutional investors went on a selling spree of large-cap stocks here. The secondary Kosdaq also extended losses with a fall of 2.81 percent on the same day.
In line with the stock slump, the won-dollar exchange rate also closed at a new high of 1,350.4 won per dollar, up 19.1 won from the previous trading day. This is the highest figure since April 28, 2009 in terms of the closing price.
After hitting this year's low in July, the main bourse appeared to be back on a recovery track until mid-August, as investors expected central banks here and abroad to put a gradual end to the aggressive rate hikes in the latter half of this year.
But the benchmark index tumbled as the Fed has in recent weeks repeated its strong willingness to keep fighting inflation with three consecutive giant steps, possibly increasing its key rate by 75 basis points in September.
Market analysts, however, said the Fed's hawkish rhetoric would cast a limited shock on local stock markets, as listed firms' fundamentals remain strong despite the monetary uncertainties.
"Given that Korean stocks showed weaker resilience than that of the U.S. during a recent rebound cycle, the shock from the Fed's hawkish stance will also be limited down the road," Han Ji-young, an analyst at Kiwoom Securities, said.
The analyst also expected foreign investors to make a comeback and go on a buying spree of local stocks soon.
"The recent surge in the won-dollar exchange rate is not attributable to any inherent risk factor in the Korean won, but overseas uncertainties," the analyst said. "This is why the recent crash of local stocks will not harm foreign investors' momentum for a buying spree of Korean stocks."
The brokerage also shared an outlook of the KOSPI extending a boxed-in pattern with a range of 2,380 and 2,680 until the end of this year.
Other experts also expressed a similar viewpoint on Korean stocks' fundamentals.
"When the exchange rate rose, foreign investors sold off Korean stocks during a period of global financial crisis, but major listed firms' fundamentals remain strong now, which is a key difference," IBK Investment & Securities analyst Jeong Yong-taek said. "There stands a high probability that they identified now is the proper time to buy Korean stocks at a lower price."
Financial authorities held an emergency meeting on Monday amid the financial market crash, and pledged to take measures to stabilize the market.
"With extra vigilance, we are going to maintain close cooperation with relevant authorities and step up monitoring of the market," First Vice Finance Minister Bang Ki-sun said.
Asian stocks also tumbled on Monday. Japan's Nikkei 225 closed down 2.66 percent. Hong Kong's Hang Seng Index fell by 0.73 percent.
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