Stocks fall for sixth day, Kospi below 2,500

Electronic display boards show the Kospi falling and the won declining against the dollar at Hana Bank in central Seoul on Tuesday. [JANG JIN-YOUNG]

With the Kospi down for a sixth day straight, the finance minister said that the country faces "multiple economic crises" and called on the ministry to keep an eye on government finances.

On Tuesday, the index declined as much as 1.88 percent and ended the day down 0.46 percent to 2,492.97 after a rout on Wall Street overnight and a collapse of the cryptocurrency market.

Foreign investors were net sellers of Kospi shares, while local investors were net purchasers.

Tuesday's fall follows a 3.52-percent decline in the benchmark index Monday. The Kospi is now down almost 17 percent since the beginning of the year and more than 23 percent over the past year. It is trading at 19-month lows.

The Kosdaq index fell 0.63 percent Tuesday after declining 4.72 percent the previous day.

Markets in Korea held up better than markets elsewhere, especially those in the United States, where the S&P 500 declined 3.88 percent and the Nasdaq Composite 4.68 percent on Monday.

In Korea Tuesday, Korean Air Lines was up 2.78 percent, KT 0.55 percent and LG Electronics 0.21 percent. Samsung Electronics, the largest company in the country by market capitalization, fell 0.32 percent.

"The world is experiencing a surge in inflation, and highly intensive monetary tightening, like in the United States, is predicted to persist," said Choo Kyung-ho, deputy prime minister for economic affairs and finance minister, in an emergency meeting of the ministry in central Seoul on Tuesday. "Korea is no exception."

"Multiple crises have begun and the more serious issue is the projection that this situation will not be soothed for the time being."

He said stabilizing inflation will be of utmost importance and advised the ministry to pay special attention to finance, including budget formulation and tax policy.

The fall in the financial markets "is seen spreading due to concerns that Fed will raise the policy rate more than expected to respond to the persistent inflation," Bank of Korea Senior Deputy Governor Lee Seung-heon said Tuesday.

He added that volatility in local markets is expected to continue and get worse.

Most analysts forecast the Fed to raise rates 50 basis points in June, but some have started to predict a 75-basis-point increase after the consumer price index in the United States rose 8.6 percent in May on year, the fastest increase in four decades. Consumer prices in Korea rose 5.4 percent on year in May, the fastest rate in more than 13 years.

Bank of Korea Gov. Rhee Chang-yong indicated further interest rate hikes last week, saying not making timely adjustments may cause greater damage if inflation remains.

The central bank's monetary policy board unanimously agreed to raise rates by a quarter percentage point in May to 1.75 percent, the fifth increase in the current round of tightening, which began in August last year.

President Yoon Suk-yeol said on Tuesday the government is "trying to take all the measures it can take from the supply side" to stabilize the consumer prices.

Yoon also called for a further cutting of the fuel tax, according to a report from JoongAng Ilbo Tuesday.

"Wheat and crude oil prices may be outside the domain of our control, but we have to find countermeasures to what we can do," Yoon said.

The fuel tax cut was taken to 30 percent from 20 percent on May 1.

Other concerns weighing on the markets include the trucker strike, shortages of chips and other key components and the meltdown of cryptocurrencies, which has the potential to destabilize other markets.

The won declined against the dollar to briefly touch 1,292.50 won, the highest in a month, as foreign investors fled to safer assets.

BY JIN MIN-JI [jin.minji@joongang.co.kr]