Global Stock Dive Rattles Korean Market

Worry over a possible U.S. recession and Citigroup’s worst performance in its 196-year history caused global stock markets to tumble in unison.

Korea’s benchmark KOSPI fell 41.98 points (2.40%) to close at 1,704.97 yesterday. The tech-heavy KOSDAQ index tumbled 21.89 points (3.25%) to finish at 651.36.

Foreign investors bought dollars for remittance after selling Korean stocks, and this caused the won-dollar exchange rate to rise 4.3 won from Tuesday to 940.10.

Japan’s benchmark Nikkei 225 stock index fell 468.12 yen (3.35%) to close at 13,504.51, the lowest since October 28, 2005. China’s Shanghai Composite Index fell 2.81% and the weighted price index of the Taiwan Stock Exchange dropped 2.96%. The Dow had spiraled down 2.17% Tuesday to record a nine-month low of 12,501.11. Similarly, the U.S.’ tech-heavy NASDAQ index dropped 2.45%.

The U.S. Commerce Department announced Tuesday that retail sales increased a mere 4.2% last year, the lowest growth in five years. Citigroup also said it suffered the worst loss in its history in last year’s fourth quarter at 9.83 billion dollars (1.99 dollars per share).

An American economic slowdown will inevitably hurt Korean exports. This will put a heavier burden on the Korean economy, which is already reeling from skyrocketing prices for raw materials including oil and inflation.

ssoo@donga.com kong@donga.com