KOSPI drops to 15-month low 1,697, won surges thanks to intervention


The Seoul stock market wrapped up its worst week since July, 2010 Friday, as investors continued to slash their exposure to local assets on overnight losses in the United States and Europe.

The benchmark KOSPI tracked overnight falls in the U.S. and plunged 5.7 percent to 1,697.44, its biggest daily loss in five weeks.

Volatility widened at the foreign exchange market. The won closed 1 percent higher at 1,166 per dollar thanks to outright intervention from the Bank of Korea. Traders speculated the won would have gone to its lowest in years without heavy dollar-selling by the authorities.

“Fear really dominated the market because overnight losses in Europe and U.S. were heavier than expected,” Jung Bae-sun, a research associate at Samsung Economic Research Institute said. The KOSPI lost about 13 percent since Sept. 1.

The currency trading was left open beyond usual closing hours of 3 p.m.

Traders say the Finance Ministry extended the trading session for a couple more minutes to execute its intervention and push up the won against the greenback.

“The won would have depreciated more sharply, but the dollar-selling by the authorities kept the won to trade between 1,180 and 1,190,” a dealer said.

Samsung Electronics was down 4.05 percent and closed at 758,000 won a share. Hynix Semiconductor fell 6.03 percent to 20,250 won and Woori Finance Holdings plunged 9.23 percent to 8,650 a share.

“Investors are now focusing on the G20 meeting this weekend. Volatilities may narrow in stocks and the currency market next week if concrete policy coordination plans come out of the meeting,” Jung said.

The Finance Ministry and the Bank of Korea held a policy consultation meeting earlier in the day and vowed to tighten monitoring for “irregular movement” in the currency market.

The ministry said the government will closely monitor financial market conditions, calling the recent currency market reaction “excessive.”

“We will beef up market monitoring through close cooperation between the two agencies, along with other financial authorities,” the ministry said.

“The ministry and the BOK shared the view that the herd behavior in the currency market is excessive ... and also agreed to take any necessary actions to ease the situation,” it added.

By Cynthia J. Kim (cynthiak@heraldcorp.com)