KOSPI closes at 514.46; Won stops falling against dollar

Financial markets underwent violent fluctuations amid unfavorable market conditions and authorities' intervention. The Korea Stock Price Index (KOSPI) dipped below 490 for an intra-day low Friday due to a massive sell-off by foreign investors but it closed at 514.46, up 5.23 points or 1.02 percent from the previous day, on the back of aggressive buying by institutional investors such as investment and trust firms. The Kosdaq index hit 67.81, up 0.55 points or 0.81 percent from the previous day.

On the Seoul foreign exchange market, the Korean won stopped its two-day-long steep fall against the U.S. dollar after financial authorities made an indirect intervention. The won closed at 1,209.5 won, down 4.80 won from a day earlier.

In the stock market, foreign investors continued to shed large-cap stocks en masse for the second consecutive day and recorded a net selling of 287.1 billion won. The amount was the fifth highest in the nation's stock market history and sparked concerns of a foreign capital exodus from the domestic stock market.

But in the futures market, buying exceeded selling, confusing investors. Institutional investors such as investment and trust firms and pension funds recorded net buying of 252.7 billion won after aggressively taking over stocks sold by foreign investors. It was reported that a considerable portion of 700 billion won worth of pension funds additionally raised on Dec. 1 and 2 were spent on buying up stocks.

The Korean currency opened about 4 won higher than the previous day, but dropped to as low as 1,203 won by 10 a.m. after Korea Development Bank (KDB) injected US$150 million worth of policy funds. But the won rebounded soon after to 1,214 won due to a sudden revival of demand for dollars and continued to fluctuate all day.

A dealer at a foreign bank predicted that the won would not fall below 1,200 won but continue to move between 1,200 won and 1,230 won next week. He attributed this to the fact that authorities cannot afford to make a significant intervention with state-owned enterprises' policy fund holdings remaining at only around US$1 billion.