U.S. rate cut boosts Korean stock prices; KOSPI closes at 558.02

The U.S. Federal Reserve Board`s decision to cut interest rates gave a big boost to the exchange rate and to the prices of Korean stocks and bonds.

In the Seoul stock exchange Thursday, the composite stock price index, or KOSPI, closed at 558.02, up 36.59 points or 7.02 percent from the previous day. It was the highest level since the index closed at 565.18 on Nov. 10 last year. The Kosdaq index also surged 4.61 points or 8.10 percent to 61.61. The trading volume was relatively heavy at 444.5 million shares on the central bourse and 233.12 million shares on the Kosdaq market.

Foreign investors led the market rally by making a net purchase of 395.2 billion won worth of stocks and 314.1 billion won worth of futures. Institutional investors also bought up 80.3 billion won worth of stocks.

The KOSPI began to rally immediately after opening and easily reached 527.43 and 537.22, which had been considered psychological barriers.

Bond prices also jumped and the annual earnings ratio of corporate bonds closed at 7.97 percent, down 0.14 percentage points from the previous day. It is the first time in history that the earnings ratio of corporate bonds dropped to the 7-percent range. The earnings ratio of three-year-maturity national bonds also fell 0.26 percentage points from a day earlier to close at an all-time low of 6.38 percent. That of monetary stabilization bonds with one-year maturity also dipped 0.36 percentage points to 6.40 percent.

An analyst at Daewoo Securities predicted that as massive funds are continuing to rush into the bond market, the earnings ratio of national bonds would drop as low as the 6.0 percent range and that of corporate bonds to the 7.2 percent range.

In the currency market, the Korean won closed at 1,255.0 won to the U.S. dollar Thursday, down 15.1 won from the previous day. The won began the day trading at 1,238 won to the dollar after falling as low as 1,241 won to the dollar in non-deliverable forward markets (NDF) on the previous day under the influence of the Fed`s interest rate cut and the surge of the Nasdaq market.

As the Korean won surged, companies such as oil refineries bought up dollars to settle their accounts, pushing the won down to 1,256.7 won to the dollar at one point. The won moved within a range of 18.7 won during the day.