Markets, won sink below 'Black Monday' levels amid martial law turmoil

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Markets, won sink below 'Black Monday' levels amid martial law turmoil

Published: 09 Dec. 2024, 18:35 Updated: 09 Dec. 2024, 19:37

PARK EUN-JEE
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Audio report: written by reporters, read by AI

Foreign currencies are shown at a street money changer in Myeong-dong in central Seoul on Monday. [YONHAP]

The value of the Korean won and the domestic stock markets tanked on Monday, staying below the levels recorded on this year’s "Black Monday" on Aug. 5 when global stocks underwent a significant correction.

With the country plagued by a parliamentary impasse and political turmoil following President Yoon Suk Yeol’s short-lived martial law declaration, the financial authorities have scrambled to warn local securities and banks to secure a sufficient amount of foreign capital.

Analysts, too, project that the combination of the weak Kospi and won will be here to stay with no end in sight to the political gridlock.

The won sharply depreciated against the greenback to trade at 1,437 won per dollar as of 3:30 p.m., down 17.8 won from the previous session, the weakest exchange rate since Oct. 22, 2022.

Korea's main Kospi bourse posted a 2.78 percent decline Monday to close at 2,360.58, the lowest since Nov. 2. The figure is lower than Aug. 5’s 2,441. 55 close, although the present Monday's level of session-to-session decline was softer.

The Kospi lost 8.77 percent on Aug. 5 due primarily to heightened worries over weaker-than-expected economic growth, taking a negative cue from the U.S. and Japanese markets.

The tech and bio-heavy Kosdaq suffered a wider margin of decline at 5.19 percent to close at 627.01 as the secondary index tends to be more susceptible to market volatility.

The financial indices are positioned to lose ground in the coming days, as there remain few factors to boost them.

“With lingering political uncertainties, especially at home, we need to open the door to the possibility that the won-dollar exchange rate will continue to move upward,” said Lee Joo-won, an analyst at Daishin Securities, adding, "We are now in a situation where a reversal of the upward trend is unlikely."

Lee Jae-won, an analyst at Shinhan Securities, painted a similarly bleak picture for the Kospi.

“With the failed attempt to impeach the president and the Democratic Party’s vow to try again and again, uncertainties continue,” Lee of Shinhan said in a report released Monday.

The analyst noted that the vast majority of Kospi-listed stocks — 848 out of 928 — declined on Monday, 311 of which recorded a 52-week low, a testament to the vulnerable investment sentiment across the board.

Against that backdrop, the country’s financial regulators are tightening up their monitoring in an effort to limit the impact of the political unrest.

Financial Supervisory Service (FSS) Chairman Lee Bok-hyun advised local financial institutions to brace for a possible foreign capital drought.

“[The FSS] has ordered financial institutions to secure a sufficient amount of foreign capital, while strengthening the monitoring of foreign capital exchanges,” the regulator said in a statement, adding that it will closely look into the capital adequacy ratio of financial companies.

Financial Services Commission Chairman Kim Byoung-hwan also urged the heads of Korea’s major financial holdings firms to ramp up vigilance against any risks, including a liquidity crunch. The holdings firms consist of Shinahn Financial Group, KB Financial Group, Hana Financial Group, Woori Financial Group and NH Financial Group.

BY PARK EUN-JEE [[email protected]]