Posted October. 07, 2008 03:22,
The approval of the U.S. financial bailout plan did little to help Koreas financial market yesterday, as the value of the Korean won sharply declined against the dollar and stock prices plummeted.
The Korean currency ended at 1,269 to the dollar, down 45.5 points from Fridays close and the lowest since 1,269.8 on May 16, 2002. The wons value this year has fallen 26.26 percent since closing at 935.8 Jan. 15.
Experts blamed several factors for the plunge. Externally, fear over the spread of the U.S. financial crisis to Europe and signs of trouble in the real economy have deteriorated conditions in the global capital market. Domestically, worry over foreign currency liquidity and massive stock selloffs by foreign investors contributed to the wons decline.
On foreign currency liquidity, Strategy and Finance Minister Kang Man-soo told a meeting of bank presidents, Banks must do their part to secure foreign currency liquidity by prematurely liquidating overseas assets, such as foreign currency-denominated securities or attracting conglomerates with foreign currency deposited overseas.
We will reward banks that do this while imposing penalty rates on financial companies with moral hazard.
Financial Services Commission Chairman Jun Kwang-woo also said, It is far from desirable that banks facing difficult conditions rapidly cut down lending to small and medium-size companies.
The benchmark stock index KOSPI hit a yearly low of 1,358.75, down 60.9 points (4.29 percent) from Friday and the lowest since hitting 1,355.79 on Jan. 10 last year.
The index closed the day down 530.13 points (28.1 percent) from the yearly high of 1,888.88 on May 16.
Other Asian stock markets fared no better. Japans Nikkei nosedived to 10,473.09, down 465.05 points (4.25 percent) from Fridays close. Chinas Shanghai Composite Index ended at 2,173.74, losing 120.05 points (5.23 percent).