KOSPI plunges due to Bernanke and China shocks

Asian financial markets are tumbling due to Bernanke and China-originating credit crunch shocks. China`s Shanghai Composite Index plunged 5.29 percent Monday and Korea`s main stock index KOSPI fell below 1,800 for the first time in 11 months.

Since the beginning of this month, foreign investors have unloaded more than 14 trillion won (12 billion U.S. dollars) of shares in seven Asian countries including Korea.

Shanghai`s key index closed Monday at 1,963.24, plummeting by 109.86 from Friday. This is the first time it fell below the 2,000 mark since December last year. The plunge is due to the banking sector`s liquidity crisis and rising concerns on economic slowdown. Lending rates among Chinese banks surged triggering credit crunch worries, but the People`s Bank of China ruled out possibility of an additional liquidity supply.

Other Asian stock markets also plunged. The KOSPI retreated 23.82 points (1.31 percent) to 1,799.01, the lowest since July 26 last year when the index was 1,782.47. The Hang Seng Index fell by 5.30 percent, the Philippines index by 3.41 percent, Indonesian index by 1.34 percent and Japanese index by 1.26 percent.

As a result, foreign investors are flocking out of Asian stock markets. Foreign investors net sold 12.29 billion dollars of shares for the 21 days of this month, in seven Asian countries including Korea, Taiwan, India, Thailand, Indonesia, the Philippines and Vietnam, according to International Finance Center.

Meanwhile, the government said it decided not to extend the 3 billion dollar won-yen currency swap deal that expires on July 3. As a result, the currency swap line between the two countries, which expanded to 70 billion dollars in October 2011, will be reduced to 10 billion dollars.