Credit crunch concerns sink stock market

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Credit crunch concerns sink stock market

Korean stocks took a nosedive yesterday with a key index plunging almost 3 percent, as investor sentiment was hurt by worries over a global credit crunch and a possible monetary tightening, analysts said.

The benchmark Kospi tumbled 46.25 points, or 2.9 percent, to 1,533.47. Volume was moderate at 323.4 million shares worth 5.22 trillion won ($5.05 billion), with losers outpacing gainers 724 to 100.

“Foreign investors went on a massive selling spree of local stocks amid renewed worries over a credit crunch,” said Lee Sun-yup, an analyst at Goodmorning Shinhan Securities. “Investors seemed to consider the warnings by the foreign exchange authorities to stem currency volatility as a possible tightening.”

Analysts said market sentiment remains weak on inflation risks and continued sale of local stocks by foreigners. They unloaded Korean stocks for the 22nd straight session, weighing on the Seoul bourse.

The government and the central bank said Monday they are concerned about “herd behavior” in the local currency market and will take strong measures if volatility is deemed excessive. The move is aimed at controlling spiraling inflation. On the back of the strong warnings, the won gained ground against the U.S. dollar.

Financials took a hit on monetary tightening fears. Top lender Kookmin Bank plunged 8.6 percent after JPMorgan Chase cut its recommendations for the shares from “overweight” to “neutral,” saying the lender may not have enough capital to turn itself into a financial holding company. The bank’s share price has declined below the price the bank set for converting its current stocks into those of its envisioned holding firm.

Builders also lost ground on concerns that higher inflation will dampen consumer spending and housing demands. No. 1 builder Daewoo Engineering and Construction fell 6.4 percent. Hyundai Development led declines in Korean construction shares on concern government spending may shrink in an effort to curb inflation. Hyundai Development, a builder that gets more than half of its sales from residential homes, fell 6.1. Hyundai Engineering and Construction Co., the country’s largest builder, dropped 8.5 percent, the lowest since April 23, 2007. Tech blue chips traded lower with market leader Samsung Electronics declining 3.42 percent to 593,000 won. Yonhap, Bloomberg
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