Sign in Subscribe
Information technology services industry

South Korean Financial Markets Plummet Amid Global Economic Concerns

Strategic Insights

— 2 min read

South Korean financial markets were in disarray on Monday following the Standard & Poor's downgrading of the US sovereign credit rating, sparking fears of a global economic downturn. The benchmark Korea Composite Stock Price Index (KOSPI) fell 3.82 percent, dropping 74.30 points to close at 1,869.45. Trading volume stood at 564.82 million shares worth 10.68 trillion won, with the index expanding its initial declines sharply in early afternoon after falling below the 1,900-point level.

Key Takeaways:

  • The KOSPI dropped 74.30 points, or 3.82 percent, to close at 1,869.45, with the index expanding its initial declines sharply in early afternoon.
  • Trading volume stood at 564.82 million shares worth 10.68 trillion won, with foreign investors selling a net 78.7 billion won worth of local shares.
  • Retail investors dumped a net 733.7 billion won worth of shares, while institutional investors were net buyers worth a net 643.2 billion won worth of stocks.
  • Local brokerages liquidated their holdings of stocks that were given as collateral from retail investors, prompting a series of follow-up sales by other retail investors.
  • The US credit rating cut triggered market fears that the world's largest economy could slip into double-dip recession, with analysts citing concerns over the global economic recovery.
  • China, which held a huge amount of US bonds, may be affected by the US rating downgrade, boosting fears that South Korea, which heavily depends on exports for China and the US, will see weakness in economic fundamentals.
  • The local currency fell sharply against the dollar after the KOSPI fell into panic, but currency analysts predicted the South Korean won would not depreciate strongly from the current level.

Statistics:

  • The Korean Composite Stock Price Index (KOSPI) dropped 74.30 points, or 3.82 percent, to close at 1,869.45.
  • Trading volume stood at 564.82 million shares worth 10.68 trillion won.
  • Foreign investors sold a net 78.7 billion won worth of local shares.
  • Retail investors dumped a net 733.7 billion won worth of shares.
  • Institutional investors were net buyers worth a net 643.2 billion won worth of stocks.
  • The local currency fell 15.1 won against the dollar, finishing at 1,082.5 won.
  • The yield on the liquid three-year treasury notes fell 1 basis point to end at 3.6 percent.
  • The return on the benchmark five-year government bonds gained 4 basis points to close at 3.81 percent.

Sources:

  • Xinhua News Agency, "South Korean financial markets fall into panic after US credit rating cut", August 8, 2011.
  • Xinhua News Agency, "South Korean currency falls sharply against US dollar after KOSPI nosedives", August 8, 2011.
  • Xinhua News Agency, "South Korean bond market ends mixed despite stronger demand for safer assets", August 8, 2011.

Read more