Stock and bond prices as well as Korean won against dollar fell due to multiple unfavorable factors in the market. The benchmark Korea Composite Stock Price Index (KOSPI) plunged nearly 2 percent, slipping below the 3,000 mark and won-dollar exchange rate rose as high as 1,190 in 14 months.
Concerns over the possibility of a “perfect storm” hitting the financial market are rising due to overlapping structural factors that cannot be resolved in the short term, including disruptions in the global supply chain, fears of inflation accelerated by a rise in raw material prices, and concerns about an economic slowdown.
According to the Korea Exchange (KRX) on Wednesday, KOSPI fell 53.86 points, or 1.82 percent, from the previous day to close at 2,908.31. This is its lowest level of the year, even lower than that of Jan. 4 (2,944.45), the opening day of 2021. Following a fall below the 3,000 mark for the first time in six months the previous day, KOSPI is now on the verge of falling below the 2,900 mark.
The won-dollar exchange rate and bond prices also plunged. The won was quoted at 1,192.3 per dollar, up 3.6 won from the previous day, on the Seoul foreign exchange market on Wednesday. This is the first time since Aug. 4 of last year that the won surpassed 1,190 won. The 3-year Korean treasury bond yield rose by 0.069 percentage points to close at 1.719 percent, hitting another new high. The 5-year treasury bond yield also broke the previous high at 2.082 percent. Experts point out that the country is seeing a repeating vicious cycle, where weakening won against the dollar and falling bond prices lead to a sharp decline in stock prices.
The reason behind a continuing fall in stock and bond prices, and the won’s value against dollar is due to worsening investor sentiment caused by multiple unfavorable factors. With disruptions in the global supply chain and a rise in raw material prices raising fears of inflation, a possible collapse of China’s Hengda Group and power supply crunch in China are stoking concerns of a slowdown in China’s economy, resulting in heightened anxiety among investors.
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