Kospi plunges nearly 3% on US bond yields hike

The South Korean key stock index dipped nearly 3 percent Friday, just managing to stay above 3,000 points. Affected by US inflation woes, foreign and institutional investors accelerated their selloffs of local shares.

The main bourse Kospi began trading lower at 3,089.49 points then continuously moved downward throughout the day to close at 3,012.95 points, falling 2.8 percent from the previous session’s close. The index retreated below the 3,000-point threshold until around 3 p.m., but slightly recovered from earlier losses toward the end of trading.

The deepened losses were driven by an overnight Wall Street plunge on the impact of bond yields. The Dow Jones Industrial Average dipped 1.75 percent, while the Nasdaq and S&P tumbled 3.52 percent and 2.45 percent, respectively. The 10-year US Treasury yield jumped to the 1.6 percent level Thursday, marking its highest level since Feb. 14, 2020.

Foreign and institutional investors turned to net sellers, dumping a net 44.1 billion won ($39.19 million) and 200.9 billion won, respectively, while small domestic investors purchased a net 245.3 billion won.

“Backed by the surging US bond yields, the possibility of capital flight from emerging markets has arisen, resulting major indexes in countries such as Korea and China to plummet,” said Seo Sang-young, an analyst at Kiwoom Securities.

Most large-cap stocks traded lower.

Market kingpin Samsung Electronics lost 3.28 percent and No. 2 chipmaker SK hynix declined 4.71 percent. Leading internet portal operator Naver fell 2.09 percent and chemicals giant LG Chem shed 6.63 percent. Meanwhile, mobile giant Kakao and the nation’s second-largest carmaker Kia advanced 0.72 percent and 3.12 percent, respectively.

The tech-heavy Kosdaq also plunged 2.38 percent to 913.94 points at the closing bell. The index started off 0.61 percent lower and extended the bearish trend throughout the day. Foreign and institutional investors’ combined net sales in Friday’s trading came in at 386.7 billion won.

The value of the Korean weakened against the US greenback. The local currency closed at 1,123.5 won per dollar, adding 15.7 won per dollar, or 1.42 percent, from the previous session’s close.

By Jie Ye-eun (yeeun@heraldcorp.com)