Stock Market Turns Pale

The Korea Stock Price Index (KOSPI) marked an annual low, and the KOSDAQ hit an all-time low.

In addition to the domestic issues of the prolonged economic slump and the unsettling political scenes, international influences such as the oil price hikes and threats over potential terror attacks in the United States have hurt the sentiment in the market.

The Seoul stock market (KOSPI’s) closing price on August 2 was 15.75 points (2.14 percent) lower than the day before and fell to 719.59. This is a 10-month low since October 2, 2003, when it closed at 715.24.

The KOSDAQ also dropped 6.03 points (1.82 percent) to 325.18 at market close and replaced the previous all-time low, which occurred only two days ago on July 29.

The market downfall is caused by the prediction of domestic economy stagnation. Also, news that the U.S. Homeland Security Department raised the terror alert warning for the financial services sector in New York and Washington from yellow (elevated) to orange (high) on August 1 negatively impacted the market.

In the meantime, September delivery of West Texas Intermediate (WTI) crude oil price rose $1.05 (2.5 percent) per barrel to $43.80, setting the all-time high in the New York Mercantile Exchange, and that has dampened the investors’ sentiment as well.

Foreign investors bought 123.6 billion won worth of stocks on net (the amount resulting from deducting the total sale from the total purchase), while they focused on selling in the futures market, preparing for the market downfall. This indicates that foreign investors are currently buying large amounts of low-priced stocks, but at the same time, they are not very positive about the Korean market’s future.

Samsung Electronics shed 9,000 won (2.16 percent) and closed at 408,000 won, dropping to the 400,000 won level again in two weeks’ time since July 15.

Market heavyweights such as SK Telecom, LG Electronics, Samsung Electro-Mechanics all trickled downward to one-year lows.

Kang-Woon Lee Jae-Seong Hwang kwoon90@donga.com jsonhng@donga.com