Stocks surrender most of Friday’s big gain
The benchmark Kospi again lost more than 5 percent, closing down 5.34 percent, wiping out most of the 7.44 percent increase Friday that followed news of $60 billion dollar currency swap with the United States.
Trading in Kospi and Kosdaq stocks was halted.
As the market opened, Kospi stocks were down 5.8 percent, and shares continued to decline from there.
After Kospi 200 futures dropped 7.21 percent, the Korea Exchange activated a sidecar, which halted trading for five minutes. The Kosdaq was also halted after Kosdaq 150 futures experienced more than a 6 percent drop Monday morning.
Kosdaq closed at 443.76, posting a hefty 5.13 percent drop.
Foreign investors continued to escape the Korean market, selling a net 640 billion won ($503.5 million) worth of shares. Institutional investors sold a net 361.2 billion won worth of shares.
Individual investors net purchased 920.2 billion won. They have been heavy buyers recently, with the exception of last Thursday.
A failure of U.S. Congress to pass a $1.8 trillion stimulus bill over the weekend contributed to the global volatility.
“Korea’s stock market will only become more volatile for the time being especially with the failure of fiscal stimulus in the United States factoring in as a big disappointment,” said Seo Sang-young, analyst from Kiwoom Securities. “Key economic indexes in Europe and the United States are scheduled to be announced this week. They are estimated to have contracted by a large margin which will bring another wave of shock to the Korean stock market as well.”
The Shanghai Composite Index lost 3.11 percent Monday, and Hong Kong’s Hang Seng index fell by 4.93 percent. S&P 500 and Dow Jones Industrial Average futures trading had to halt at one point as they hit their 5 percent limits.
Despite the currency swap to relieve dollar shortage in Korea, the value of the won closed Monday up 20 won from 1266.5 won against the dollar.
Bank of Korea and the U.S. Federal Reserve had agreed to a $60 billion currency swap Thursday evening to relieve the dollar liquidity crunch as investors scrambled to safe haven assets.
The dollar shortage lead the Korean won to shoot up to 1,290 won Thursday, followed by a quick rebound Friday, where it closed at 1,246.5 won against the dollar.
BY JIN EUN-SOO [firstname.lastname@example.org]