Seoul stocks tumbled 3.52 percent to 1,749.16 on Wednesday as investors abandoned trade-dependent market assets on the European fiscal saga.
The won ended 2.75 percent down against the U.S. dollar at 1,107.8, as investors chased safer assets. It was the biggest daily percentage drop since a 2.76 percent fall on June 7, 2010.
The Bank of Korea appears to have intervened to slow the depreciation on Wednesday, according to news reports.
The machine industry fell on average of 5.42 percent. Logistics, chemical, banks and brokerages all suffered more than 4 percent of loss. The junior KOSDAQ fell 3.96 percent to finish at 452.3.
“The tumble reflects tensions that have been building up in the money market over the Chuseok holiday,” Kim Yong-joon, director of the market monitoring team at Korea Center for International Finance, said.
The KOSPI is down more than 21 percent since its May 2 record high.
“Asian currencies are weakening on the European debt concerns and the loss is particularly big with the won because of the two-day break over Chuseok,” Kim said.
Global stocks were swinging between gains and losses over the weekend on the developments in the eurozone debt crisis. The news that China may be buying Italian bonds provided temporary relief to the market, but the effects were short lived on the news that credit downgrading of French banks are imminent.
The Finance Ministry held an emergency meeting Tuesday to discuss the impact of the renewed debt concerns in Europe. Seoul officials vowed to enhance monitoring of capital flows.
“The Korean market, like any other, awaits major political decisions in Europe to be cleared in the coming weeks. The risks could potentially grow large depending on how the European authorities manage the fiscal saga,” Kim Yi-tae, director of the international finance division at the Finance Ministry, said.
Barclays Capital said Bloomberg-JP Morgan Asia Dollar Index, the main currency index for Asia, could decline as much as 1.6 percent in the next few weeks as more investors would snap on the U.S. dollar.
By Cynthia J. Kim (
cynthiak@heraldcorp.com)
