Posted September. 17, 2008 07:52,
The bankruptcy filing of Lehman Brothers, the sale of troubled Merrill Lynch to Bank of America, and the liquidity crisis of American International Group rattled world stock markets yesterday.
Koreas benchmark KOSPI stock index fell below 1,400 as foreign investors sold off stocks. The won also suffered its highest single-day drop in 10 years.
The KOSPI fell 90.17 points (6.1 percent) to close at 1,387.75, its lowest level in 18 months. The drop was the biggest this year and the third largest since the inception of the Korean stock market.
The tech-heavy KOSDAQ also fell 37.62 points (8.06 percent) to close at 429.29, the biggest drop this year. Thus 51.42 trillion won evaporated in one day -- 45.8 trillion won on the KOSPI and 5.63 trillion won on the KOSDAQ.
The sudden drop in futures triggered the sidecar in the morning, temporarily halting trading.
Foreign sales of stocks on the Korean market drove up the won-dollar exchange rate. The won fell 50.9 points against the dollar from Friday to close at 1,160, the largest drop since a 67-point fall in August 1998.
Asian stock markets also plummeted. Chinas central bank lowered the basic interest rate on the cash reserve ratio for the first time in four years to boost the economy, but the Shanghai Composite Index fell 4.47 percent to close at 1,986.64.
The Dow Jones average nosedived 504.48 points (4.42 percent) on the New York Stock Exchange from last week to close at 10,917.51 in the wake of the Lehman bankruptcy. The drop was the biggest for one day since Sept. 17, 2001, the first trading day after the terrorist attacks on the United States.
The three major credit rating agencies -- Moody`s, Standard & Poor`s, and Fitch -- also lowered the credit rating of liquidity-strapped AIG, thus the crisis is likely to spread to other areas.