Seoul markets hit by default fears in Greece

KOSPI falls by 3.59% while local currency closes at 1,194 won against dollar


Korea’s financial markets on Wednesday reflected worse fiscal projections unveiled by the Greek government, seeing a plunge of stocks prices and further depreciation of the won against the U.S. dollar.

The Korea Composite Stock Price Index fell by 63.46 points, or 3.59 percent to close at 1,706.19 on the Korea Exchange.

The benchmark KOSPI lost more than 4 percent to fall below 1,700 during the trading session. Samsung Electronics and Hyundai Motor led drops in stock prices of major enterprises.

In particular, the Korea Exchange activated sidecar during the trading session, posting the fourth time the mechanism has been triggered this year. The sidecar scheme refers to a rule that lets the bourse operator suspend futures trading during periods of extreme market volatility.

The Korea currency lost 15.9 won to close at 1,194 won against the dollar due mainly to massive buying of the U.S. greenback among foreign traders.

As the won-dollar exchange rate surpassed 1,200 won during the session, policymakers reportedly intervened in the market. The won lost ground against the greenback for the third consecutive trading session.

According to the budget draft unveiled by the Greek government, Greece’s debt is expected to rise to nearly 173 percent of 2012 GDP from about 162 percent in 2011.

The budget draft forecast that the Greek economy will suffer a fourth consecutive year of contraction, shrinking by 2.5 percent next year after an expected 5.5 percent slump this year.

European markets tumbled Monday after Greece said it wouldn’t be able to reduce its budget deficits as much as it had agreed to as part of a deal to receive more emergency loans.

Fears have been growing that Greece, despite billions of euros in rescue loans, will eventually have to default on its massive debts.

European officials indicated early Tuesday that Greece will get a loan installment it needs to keep paying its bills, though not as soon as Greece says it needs it.

Korea has seen its stocks plummet the most among major Asian markets over the past several weeks after the U.S. and European fiscal woes hit the global markets.

The main factor seen by analysts is the high ratio of foreign investment in the local bourse, possibly making it vulnerable to external woes.

Foreigners hold about 31 percent of the nation’s stocks, one of the higher levels along with Taiwan at 32 percent, compared to nations such as Thailand (20.7 percent) and Singapore (23.7 percent).

By Kim Yon-se (kys@heraldcorp.com)