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Korean Market Stays Calm Despite Failed U.S. Bailout

Posted October. 01, 2008 03:00,   


Unlike its international counterparts, the Korean financial market reacted calmly to the failed U.S. bailout plan, though the won fell to the 1,200 level against the dollar.

The Financial Services Commission after an emergency meeting yesterday morning announced initiatives to calm the market. It banned short selling through the end of the year and allowed a corporation to issue up to 10 percent of its stock through treasury shares, up from a limit of one percent.

The benchmark stock index KOSPI closed at 1,448.06, 8.3 points (0.57 percent) lower than Monday. Upon opening, the market nosedived below 1,400 with a drop of 72.39 points (4.97 percent) in going into a panic state. Corporate investors soon began placing buy orders and the drop subsided near closing time.

Likewise, the won-dollar rate shot up to 1,230 in early trading. Mindful of the sudden rise, sell orders poured in and calmed the market down. The rate went up 18.2 points from Monday, to close at 1,207, the biggest drop in the won’s value since May 29, 2003 (1,207).

Financial markets withheld the shock from the failed U.S. bailout relatively calmly, but the rising trade deficit held the economy back.

The Bank of Korea said the trade deficit in August rose 2.18 billion U.S. dollars to reach 4.71 billion dollars, the highest since the government began tallying the figure in 1980. The aggregate deficit over the first eight months of the year reached 12.59 billion dollars. The deficit from the trade of goods hit 2.82 billion dollars, the highest since 2.9 billion dollars in August 1996.

parky@donga.com jefflee@donga.com