Posted June. 03, 2004 21:10,
With the rumors of an interest rate hike in China acting as a negative factor, the Korea Composite Stock Price Index tumbled approximately 35 points on June 3. Interest rates also fell by a large margin with bond prices rising.
On the Seoul stock market this day, the KOSPI dropped 34.33 points (4.27 percent) from the previous day to 770.06 and the Kosdaq fell 12.90 points (3.16 percent) to close at 394.93.
The KOSPI started the day up as news of an expected production increase by OPEC and a fall in international oil prices came about. However, as talk of Chinas interest rate hike circulated during the day, stock prices started to show sharp declines.
Samsung Electronics, of which foreign investors are on a rampant sell trend, fell 28,500 won (5.68 percent) to finish at 473,500 won.
Quoting a Chinese official, Hong Kongs English newspaper South China Morning Post reported that it was highly likely that China would announce stringent measure such as an interest rate increase and an electric rates hike within a matter of weeks.
Goldman Sachs also revealed, China is projected to carry out an interest rate increase before the end of summer, and mid-July is believed to be most likely, through its Asia Pacific regional report.
An official of the Peoples Bank of China, the nations central bank, dismissed the early predictions of an interest rate hike, explaining that Because China has other policies to suppress inflation, it does not have any plans to increase interest rates at the moment.
Despite such denials, most Asian stock markets displayed a downfall with investor confidence shrinking at the rumors. Taiwan stock prices tumbled 3.48 percent with prices in Japan, Hong Kong, and Singapore all falling over 1 percent.
Due to the drop in stock prices and the rumors of Chinas interest rate increase, on this days Seoul bond market, the three-year bond yield, a major indicator, fell 0.09 percentage points and closed at 4.18 percent. This is the lowest level in eight months since October 13 of last year when it reached 4.16 percent.