Markets tumble on fear of a fifth wave

Economy

Published: 29 Nov. 2021, 16:59

Markets tumble on fear of a fifth wave

The view of a tradiatioal market in Mapo, Seoul, on Monday. The emergence of a new Covid-19 variant is raising concern on the impact it may have on th real economy. The finanical markets have already responded with the stock market tumbling strongly since Friday. [YONHAP]

The Omicron variant shook Korea's financial markets, as fears mount of a fifth wave of the coronavirus.

The Kospi dropped 44 points or 1.5 percent compared to the previous trading day Friday morning, although selling subsided in the afternoon. It ended Monday at 2,909.32, down 27.12 points or 0.92 percent.

Even last Friday, with first reports of the new variant, the Kospi tumbled 43.83 points or 1.47 percent.

On Monday, retail investors were particularly spooked, while foreign and institutional investors were net buyers.

Not long after the market tumbled Monday morning, the Korean government held an emergency economic meeting headed by Vice Finance Minister Lee Eog-weon.

“With the emergence of the variant Omicron, there is a possibility of global financial market volatility expanding,” Lee said.

Lee said the very fact that there is not much information on the Covid-19 variant could have a punishing effect on markets in Korea and abroad.

He called for calm.

He noted that around the world the reaction has been swifter and stronger than in earlier waves.

He said public health measures and medical systems have improved.

Economically, people are now accustomed to working remotely and conducting economic activities such as buying goods online.

“The government will be operating a 24-hour monitoring system closely following the Korean and offshore financial markets while closely reviewing the impact the Omicron variant could have on the financial markets and the economy,” Lee said.

Although the new variant may affect this year’s economic growth numbers, it could retard next year’s.

If inflation pressure continues while economic growth weakens, Korea could face stagflation.

Omicron has been found in 14 countries, and many have started locking down their boarders.

Korea is one, denying the entry of foreigners traveling from eight African countries.

“Concern of the new variant virus is spreading in the market, which rebounded since October,” said Samsung Securities analyst Shin Seung-jin. “The global financial market is showing immediate responses indicating that an unexpected factor affecting expectations for an economic recovery led by normalization has emerged."

Last week, the Bank of Korea raising the key interest rate for the second time this year amid worries about inflation but kept its projection for this year’s GDP growth at 4 percent, the same as in August, and next year’s at 3 percent.

BY LEE HO-JEONG [lee.hojeong@joongang.co.kr]