Stock Investors Must Not PanicThe recent plunge in the United States' stock market is severely impacting global financial sectors. The Korean stock market dropped rapidly when the market opened this morning, and emergency circuit breakers, for the first time, put a temporary termination to trading to protect the stock market. However, the composite stock index declined more than 90 points, despite all the measures to save the market, and the Kosdaq has plunged to around the 170 point mark. The serious concerns over a 'Black Monday' became reality in the stock markets of Japan, New Zealand, and Taiwan.
Severe declines in stock prices could have a serious impact on the current economy, which is still in a state of recovery. Investment in industries may shrink again because companies would not be able to gain needed capital through the stock market. Also, in Korea, the damage to individual investors is far from serious considering the fact that only one out of ten people in Korea invests in the stock market, but this kind of drop can be even more problematic when a large portion of individual investors borrow from banks for their investments. In addition, consumption could fall, with domestic demands following the decreasing market. Furthermore, the activities of domestic companies would be impacted, along with the entire economic sector, suffering from the negative impact of a stock market plunge.
There is an extremely urgent need to protect the domestic stock market from the impact of the recent plunge in the United States' stock market through the cooperation of investors, the government, financial institutions and companies. In order to stabilize the market, individual investors must not follow in a blind mass sell off of stocks. A massive sell off without consideration of the true situation would only result in an increase of the financial damage to individual investors. Individual investors must be aware of the true conditions of the market.
The government's role in easing the insecure feelings in the market is even more important. However, direct intervention must no longer be permitted. The government should concentrate on the support of market fundamentals, such as expanding investment and support of exports and technology development. Moreover, regulations and controls must be loosened and revised in order to accelerate the investment of industries and promote trade.
It is important to keep in mind that unnecessary insecurity only aggravates the current crisis and damages ourselves.
by Kim Su-gil