Stocks retreat as Russia oil import ban mulled by some countries
Stocks retreated more than 2 percent Monday and the won hit a nearly two-year low as a ban on oil purchases from Russia is being considered by some countries.
The United States and its European allies are exploring restrictions on the importation of Russian oil as the conflict between Russia and Ukraine continues, especially after the siege of a nuclear power plant ratcheted up tensions.
Russia invaded Ukraine on Feb. 24.
Investors have rushed toward the dollar and away from assets considered riskier, such as Korean stocks.
The benchmark Kospi declined 2.29 percent to close at 2,651.31 points on Monday, while Kosdaq fell 2.16 percent to 881.54 points. Foreign investors net sold 1.18 trillion won ($980 million) of Kospi shares, while institutional investors net sold 960 billion won. Individual investors net purchased 2.11 trillion won.
The won fell 1.06 percent and is now trading at 1,227.10 won per dollar, It was the first time the closing won-dollar exchange rate broke 1,220 in a year and nine months, since Jun. 2, 2020, when it hit 1,225.4.
"The continued strengthening of dollar is difficult to stabilize as long as the risks remain," said Jeong Yong-taek, an analyst at IBK Securities. "It will be difficult for the value of won to rise this week ahead of the scheduled announcement of inflation index by major countries."
The United States is releasing its consumer price index report on Thursday.
Brent crude broke $130 a barrel on Sunday. In early December, it was trading at about $65 a barrel.
"The impact of the import ban by the United States alone is projected to be limited, but if Europe joins the oil import ban, it will expand the supply shortage and result in the soaring of the oil price again," said Shim Soo-bin, an analyst at Kiwoom Securities.
The United States took one percent of Russia's oil exports as of 2020, and European countries in the OECD 48 percent.
"The rise in the price of oil has a negative impact on Korean companies that are largely engaged in manufacturing," as it increases production costs, according to a report from Hyundai Motor Securities released on Friday. For the Korean stock market to recover, a "settlement between Russia and Ukraine and the price stability of products is of the utmost importance."
BY JIN MIN-JI [email@example.com]