Finance

Trillions of won of value is gone

A masked employee works at the dealing room of Hana Bank on Monday, in Jung District, central Seoul. Korean stocks plummeted amid a surge in confirmed cases. The benchmark Kospi shed 83.80 points, or 3.87 percent, to close at the lowest level in 16 months at 2,079.04 points. The won’s value also dropped against the dollar, closing at 1,220.20 won. Gold prices have increased for two sessions straight as investors seek stable options amid uncertainties in the financial market. [YONHAP]

The Kospi index lost nearly 4 percent on Monday, closing under the 2,080-mark and shedding more than 56 trillion won ($45.9 billion) of value in a single day, as a rapid spread of the coronavirus spooked investors in a country that now has the second-highest number of cases after China.

The benchmark index closed at 2,079.04 Monday down 3.87 percent from the previous trading day’s 2,114.04. This is the largest drop since October, 2018, when the Kospi recorded a 4.44 percent decline.

“The rapid increase of Covid-19 [coronavirus] patients in Korea as well as dull index in the United States has doubled down on the investment sentiment,” said Han Ji-young, an analyst from KTB Investment & Securities.

“The U.S. S&P 500 also dropped by 1.3 percent, which seems to indicate the shock of Covid-19 is spreading around the world leading investors to avoid risk.”

Han added that the shocks of contagious illness have not in the past affected the stock market for the long term. In the Middle East respiratory syndrome (MERS) and severe acute respiratory syndrome (SARS) outbreaks, sentiment returned quickly.

Foreign investors sold off 786.8 billion won worth of Kospi-index stocks on Monday, while individual investors and institutional investors purchased 607.7 billion won and 192.8 billion won respectively.

Korea’s secondary market Kosdaq closed at 639.29, tumbling 4.3 percent Monday compared to the previous trading day. Its market cap declined by 10.3 trillion won.

The value of Korean won fell to 1,220.2 to the dollar, which is 11 won up from the previous trading day’s 1209.2 won. This is the won’s lowest value since it hit 1,222.2 to the dollar on Aug. 13, 2019.

“With an additional undershooting, the value of won could weaken until around 1,250 won. In regards to domestic stock market, if won-dollar exchange exceeds 1,200 won, foreign investors could come back by a small margin,” said Moon Dong-yeol, an analyst at Samsung Securities.

The Korean government said if the Korean won value falls further, it would roll out necessary financial measures.

“We are paying keen attention to foreign exchange market,” said Korea’s Vice Finance Minister Kim Yong-beom on Monday.

“If the market volatility increases too much, we will swiftly roll out a prepared contingency plan.”

The Financial Services Commission, Korea’s top financial regulator, acknowledged the urgency of the matter Monday, saying it would cooperate with Financial Supervisory Service and Korea Center for International Finance to come up with an emergency plan.

Lee Ju-yeol, governor of Korea’s central bank, held an emergency meeting Monday after returning from a business trip to Saudi Arabia a day earlier than planned.

“Lee said that [Bank of Korea should] monitor movements in domestic finance and foreign exchange market as the Covid-19 patients in Korea rapidly increases and the virus alert was raised to the highest level,” the bank said in a release.

BY JIN EUN-SOO [jin.eunsoo@joongang.co.kr]