Rattled Kospi retreats below 1,800

An employee of Korea Exchange Bank monitors stocks and the won exchange rate at the bank’s headquarters in central Seoul yesterday. The Kospi retreated to the 1,700s for the first time in five months due to eurozone fears. [NEWSIS]

The Seoul main bourse tumbled below the 1,800 mark just three days after it fell below 1,900 as foreign investors fled, spooked by the widening crisis in the eurozone.

Fear over Greece is now spreading to other larger economies in Europe, including Italy and Spain.

Leading shares, including those of bellwethers Samsung Electronics and Hyundai Motor, continued to spiral downward on foreign investors’ offloading.

The benchmark Kospi fell 62.78 points, or more than 3 percent, to close at 1,782.46.

The last time the stock market saw such a drop was five months ago. On Dec. 19, when North Korea announced that its leader Kim Jong-il was dead, it fell more than 63 points to close below 1,800 at 1,776.93.

On the previous day, the market stabilized and the Kospi inched up 0.26 percent.

The moment the market opened at 9 a.m. the Kospi immediately lost more than 30 points. This came after news that Moody’s credit agency had downgraded 16 Spanish banks, including Banco Santander and BBVA, the biggest banks in the country, citing their vulnerability to a renewed recession, ongoing real-estate problems and high levels of unemployment.

Even major stocks that held up started to sag as foreign investors dumped shares to profit on the Korean won’s weakening against the dollar.

Samsung Electronics lost 4.66 percent, closing below 1.2 million won ($1,023).

The leading conglomerate’s share has been breaking new records, climbing as high as 1.4 million won.

Even Hyundai Motor shares fell 4.78 percent from the previous day to close at 229,000 won, while its main affiliate tumbled more than 5.6 percent.

“It’s not easy to counter the situation as an excessive sell off is precipitating the fall,” said Oh Seong-jin, head of Hyundai Securities’ research center.

Some analysts said the market’s downward spiral will likely last a month.

For almost two weeks, foreign investors, who account for 32 percent of the Korean stock market, have been on a selling spree.

Financial Service Commission Chairman Kim Seok-dong said yesterday that the financial regulator has prepared several contingency plans for the financial market here to counter the instability caused by the Greek crisis. While attending a financial conference in central Seoul, Kim said that it would take a relatively long time to solve the crisis in Europe, and Korea would be able to weather the storm.

“We have sufficiently prepared mechanisms that will minimize the impact overall, including the restructuring of savings banks, securing stability in the foreign exchange market and improving the soundness of financial institutions,” Kim said.

By Lee Ho-jeong[ojlee82@joongang.co.kr]