South Korean stock market drops to lowest level of the year

Shares on the South Korean stock market fell just over two percent on Monday, hitting their annual low, amid growing concerns among Asian investors that a global economic downturn may be on the horizon, Yonhap news agency reported.

“The Korea Core Stock Price Index (KOSPI) fell 49.9 points, or 2.04 percent, to close at 2,391.03 points, a 19-month low. The index dropped to an intraday low of 2372.35, as Seoul-based Yonhap reported on June 20.

Detailing Monday’s South Korean stock market activity, Yonhap wrote:

Trading volume averages about 583 million shares worth about 9 trillion won ($7 billion), and the number of losers is 585 to 62 more than the winners.

Foreigners trashed 662 billion won, institutions received 446 billion won, and retail investors received 183 billion won.

After a bad start, KOSPI, led by chipmakers and other heavyweights in the market, has further lost its appetite.

Yonhap said Seoul shares fell on Monday “as investors were shaken by fears that a recession in the global economy could come amid fiscal restraints in major economies faster than expected.”

“The Fed’s hawkish stance weakens the general sentiment of investors,” South Korean financial analyst Park Gwang-nam of Mirae Asset Securities told the news agency on June 20.

Park and Yonhap referred to the US Federal Reserve’s June 15 decision to raise interest rates by three-quarters to combat high inflation. The action marked the largest rate hike by the US Federal Reserve since 1994, although “investors are waiting for it,” according to Reuters.

“After several weeks of speculation, the Federal Open Market Committee has raised the benchmark funds rate to a range of 1.5% to 1.75%, the highest level before the Covid pandemic. [Chinese coronavirus] The outbreak started in March 2020,” CNBC reported on June 16.

“Stocks were volatile after the decision, but rose after Fed Chairman Jerome Powell’s speech at the post-meeting press conference,” the financial news source said.

“Frankly, the 75 basis point gain is unusually large and I don’t expect moves of this magnitude to be widespread,” said Powell, Chairman of the US Federal Reserve, on June 15.

However, he added that he is looking forward to July. [U.S. Federal Reserve] Meeting to see a 50 or 75 basis point increase. Powell said the decisions would be “met after the meeting” and that the Fed would “continue to communicate our intentions as clearly as possible”.

The South Korean stock market’s abrupt reaction to the US Federal Reserve’s rate hike on June 15 was almost the opposite of its activity on June 20.

“South Korea shares rose more than 2% on Thursday [June 16] to capture [a] Seven days of consecutive defeat after the US central bank hiked rates by 75 basis points as expected. Korean earnings rose as benchmark bond yields fell, Reuters reported.

South Korea’s national currency, the Korean won, closed June 20 at 1,292,4 won against the US dollar. According to Yonhap’s report, the drop is marked by a 5.1 Korean won drop since the close of the previous session.