S. Korean financial markets suffer in midst of trade wars

Andy Kirk, Aug. 6, 2019, 9:31 a.m.

Financial markets in Korea reeled Monday as the U.S.-China trade dispute flared up again and Japan struck Korea from a "whitelist" of preferred trading partners.

Foreigners and other investors dumped Samsung Electronics, LG Chem and other blue-chip Korean stocks, sending the Korea Composite Stock Price Index below the key 1,950 points level, while the won weakened to a three-year low of over W1,200 against the U.S. dollar.

The KOSPI closed down 2.56 percent at 1,946.98 points to the lowest point in three years and one month.

The tech-heavy Kosdaq plunged 7.46 percent to 569.79 points, the biggest daily fall in 12 years, and officials had to apply circuit breakers to prevent a further slide around an hour and 20 minutes before the close. The measures offered little solace to investors, who continued to sell.

The won plunged W17.3 against the dollar to W1,215.3, the weakest in three years and five months.

Korean financial markets were not the only ones to suffer. Japan's Nikkei declined 1.74 percent, Hong Kong's Hang Seng 2.85 percent and the Shanghai Composite 1.62 percent.

The yuan plummeted to over 7 yuan per dollar, the lowest in 11 years and sending shock waves through global financial markets.

Investor sentiment was rattled after U.S. President Donald Trump said he will slap an additional 10 percent tariff on US$300 billion worth of Chinese products and branded China a currency manipulator, prompting Beijing to devalue the yuan to make exports more affordable.

Seo Jung-hoon at KEB Hana Bank said, "The U.S.-China trade war and diplomatic conflict between Korea and Japan have increased uncertainty even for major Korean companies. This could prompt more foreigners who parked their money in Korea when the exchange rate was around W1,100 to cut their losses and run."

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