South Korean stocks and currency fell sharply Monday in the wake of mounting concern over Greece’s state default.

Though the nation’s financial policymakers tried to ease volatile investor sentiment earlier in the day, foreigners dumped local equities on the main bourse Korea Exchange.

The benchmark KOSPI dropped 29.77 points, or 1.42 percent, from a trading session earlier to close at 2,060.49. The secondary KOSDAQ fell by 2.33 percent to close at 733.04.

Foreign investors net-sold stocks, listed on the Korea Exchange, worth 110.3 billion won ($98.4 million). Institutional and retail investors were net buyers.

The Korean won also lost ground against major currencies including the U.S. dollar, the Japanese yen and the Chinese yuan. The dollar rose by 8.4 won to close at 1,125.3 won. While many currencies gained versus the won, the euro slid.

Research analysts share the view that global investors would relocate their funds to riskless assets like the greenback until the uncertainty involving the Greek woes is lifted.

Eugene Investment & Futures analyst Kim Moon-il predicted the Korean currency’s further weakening, citing the coming rate hike in the United States, the recent rate cut in China and the Greek situation.

Korea’s financial authorities, however, forecast that the negative impact of the Greek default crisis would not linger on for a long period even if there is temporary volatility in the market.

“If the country (Greece) defaults, it could lead to more volatility that can pose some challenges for Korea’s financial market,” said Vice Finance Minister Joo Hyung-hwan during the macroeconomic and finance policy meeting of senior officials from the Ministry of Finance, the Financial Services Commission, the Financial Supervisory Service and the Bank of Korea.

But Joo cited that Greece takes up only 0.2 percent of Korea’s total exports.

“(In addition), many economists have said ― under the worst-case scenario ― the effects will not be as severe or as long drawn out as previous financial woes that hit countries like Italy, Ireland, Spain and Portugal,” he said.

To minimize the repercussions, local policymakers have already mapped out a variety of contingency plans to cope with any trouble that may arise if a settlement is not reached between Greece and its international creditors, according to the ministry.

The government has been following Greek developments on a real-time basis since last week and even set up a joint inspection team made up of financial regulatory officials and central bank officials.

The European Central Bank may continue to provide emergency liquidity until the referendum is held to avert immediate problems for the country, according to government sources.

By Kim Yon-se (kys@heraldcorp.com)