Plummeting Stock Prices Break 540 Level

The U.S.-Iraq War has brought about devaluation in the won. Investors` growing preference toward safe investments has caused decrease in treasury bond yield and increase in call rates. In this situation, the phenomenon of “financial tightness in the midst of affluent capital flow has occurred.”

The prolonged economic stagnation of advanced countries including the U.S., Japan and those countries in Europe, as well as the problem in credit card claims and the nuclear problem in North Korea are also forecasted to constrain the financial market.

On March 31, the composite stock index closed at 535.70, plunging 20.63 points (3.71.%) from that of last week`s end. The Kosdaq index also marked 37.77, dipping 1.51 points (3.84%).

Foreign investors led falling stock prices through net selling of 410 billion won; 144.4 billion won in currency exchange, 100.8 billion won on the Kosdaq and 4886 contracts in the Kospi 200 futures index.

The weak market today was mainly attributed the reasons as follows. First, SK Global was revealed that its additional bad assets blew away the total capital. Secondly, because the U.S. government decided to levy 30% of off-set tariffs on Hynix Semiconductor, the price of Samsung stocks plummeted to 280,000 won per share.

The won-dollar exchange rate was 1,254.6 won on the foreign exchange market, lower by 0.8 won after hitting highs and lows at close, showing an appreciation in the won. After rising to 1.261 won, it took a turn for the worst, as influenced by the announcement of Moodys` forthcoming maintenance of the nation`s credit rating by the Ministry of Finance and Economy and the weakening dollar on the international market.

Treasury bond yield with a 3 year maturity on the bond market showed a 4.62 p.a., falling by 0.06% (rise in bond prices). Call rate, however, closed at 4.28%, up 0.04%. Yield of 3 month negotiable certificate of deposits was 4.70%, also higher than that of treasury bonds. This was caused by the fact that money flowed heavily to safe treasury bonds due to fraudulent accounting by SK Global and card claim problems, on the contrary, companies with lower credit rating experienced difficulties in financing.

The Nikkei stock index broke the 8,000 yen level again today, closing at 7,972.71 after dropping by 307.45 (3.71%). Taiwan`s stock index dropped 3.48%.

Chan-Sun Hong hcs@donga.com