Bank strikes hit financial markets

Financial markets tumbled Friday under the influence of local bank strikes. The Korean won dipped to 1,237 won to the dollar and the composite stock price index or KOSPI set a new yearly low, threatening a plunge below the 500 level. The KOSDAQ also hit new lows for the third consecutive day.

On the foreign exchange market in Seoul, the won closed at 1,237 won against the dollar Friday, up 9.1 won from the previous day, under the impact of strikes at Kookmin and H&CB. The exchange rate reached its highest level since Mar. 8 of last year, when the won was trading at 1,239 won against the dollar.

As authorities began to intervene in the market by injecting $150 million, the won reached 1,224 won at one point but soon shed its value drastically due to buying by banks and oil refineries, market jitters stemming from bank strikes and the weak yen.

The KOSPI closed at 500.50, down 11.30 points from a day earlier, breaking the previous record yearly low of 501.73 set on Dec. 4. The index showed favorable movement in early trading amid signs of recovery in the U.S. stock market and the strength of the NASDAQ futures index, but it reversed course just before the market closing. Foreign investors sold massively to be joined later by individual investors.

The KOSDAQ registered 52.67, down 3.39 points from the previous day, to set a new record low for the third consecutive day Friday. The index has fallen six days in a row and market watchers still don't think it has hit bottom.

Hong Chan-Sun hcs@donga.com