Posted October. 17, 2008 06:49,
Fears of a recession yesterday led to panicked global financial markets again.
The Korean stock market yesterday saw its biggest daily in history and its lowest level this year. The national currency also hit a record plunge against the dollar since the end of 1997.
With worsening prospects for economic growth, consumption and employment in global economies in the wake of the financial crisis, the world faces a greater challenge recession in the real economy.
A sense of crisis is building as foreign media and credit rating agencies have given negative forecasts for the Korean economy coupled with clear signs of slowdown in the real economy as a result of low employment, potential decrease in exports and investment, and the sluggish construction industry.
Koreas benchmark stock index KOSPI fell 126.5 points or 9.44 percent to close at 1,213.78 yesterday, breaking the record fall of 125.91 points last year on Aug. 16. Percentage wise, the drop was the third-biggest drop following 12.02 percent on Sept. 12, 2001, and 11.63 percent on April 17, 2000.
Stocks of industries closely related to the real economy fell sharply such as those of steel, machinery and construction. Large-capital stocks such as POSCO, Kookmin Bank (KB Financial Group) and Hyundai Heavy Industries plummeted as well.
Foreign investors net sold 620.4 billion won (461.26 million U.S. dollars) worth of stocks, the largest amount since 973.1 billion won (723.49 million dollars) on June 12 this year.
Asian stock markets were affected by the plunge on Wall Street (7.87 percent) and European stock markets. Japans Nikkei average plummeted 11.41 percent while Chinas benchmark Shanghai Composite Index fell 4.25 percent.
The global stock plunge was triggered by spreading fear of a global economic recession following the financial crisis.
The U.S. Commerce Department said U.S. retail sales in September dropped 1.2 percent, the largest decline in three years and the first three-month dip since 1991.
Fed Chairman Ben Bernanke said, Even if financial markets stabilize, as we hope they will, broader economic recovery will not happen right away."
European markets were no exception to the drop. Frances GDP dropped 0.1 percent in the third quarter this year, recording negative growth for the second consecutive quarter. Germany saw growth of minus 0.5 percent and the United Kingdom zero percent in the second quarter, and are expected to suffer negative growth in the third.
The Korean won fell 133.5 points against the dollar to close at 1,373 yesterday, the largest depreciation since Dec. 31, 1997, when the Korean currency fell 145 points. Experts said the global stock plunge caused investors to buy dollars.