Chinese Ripples

 

The benchmark Korea Composite Stock Price Index (KOSPI) dropped by more than 2 percent to the 1,820 level due to large foreign sell-offs of Korean stocks.

The KOSPI index closed at 1,829.81 on Aug. 24, which is 46.26 points, or 2.47 percent, lower than the previous session’s close. The Monday closing marks the lowest level for the KOSPI in two years, since closing at 1,824.16 on July 10, 2013. As China's Shanghai Composite Index dived as much as 8.7 percent, remaining weak, and geopolitical tensions on the Korean Peninsula are building up, investor sentiment on the domestic stock market has quickly cooled off.

Also, foreigners sold Korean stocks, dragging down the KOSPI index. They sold 723 billion won (US$601.6 million) worth of stock on the same day, extending their net selling mode to the 13th straight session. The net sales of foreigners exceeded 700 billion won (US$582.46 million) in about 9 months, since recording 707.2 billion won (US$588.45 million) on Dec. 11 last year. Also, it is the largest figure after foreigners sold 955 billion won (US$794.64 million) worth of stock on June 13, 2013. However, institutions and retail investors snapped up shares, supporting the bottom of the index. Institutional investors purchased 400.9 billion won (US$333.58 million) of local shares, while retail investors spent 297.2 billion won (US$247.3 million). In particular, pension funds and investment trusts bought 83.9 billion won (US$69.81 million) and 159.8 billion won (US$132.97 million) worth of shares, whose prices plunged.

Shares tumbled across the board, with market heavyweights Samsung Electronics falling 2 percent to 1,079,000 won (US$898). Also, other market heavyweights also tumbled sharply, with Korea Electric Power Corporation losing 3.64 percent, Samsung Life Insurance dropping 3.58 percent, Shinhan Financial Group decreasing 4.17 percent, Cheil Industries losing 4.03 percent, and SK plunging 6.25 percent. Only Samsung SDS remained at the same level with the previous trading day to finish at 242,500 won (US$202).

Despite the fact that the KOSPI Index once plunged to the 1800 level, Hyundai Merchant Marine hit a ceiling, drawing attention. Hyundai Merchant Marine spiked 29.94 percent, its daily limit, to 6,510 won (US$5) as high-level talks between Seoul and Pyongyang are in their third day. The company is the largest shareholder of Hyundai Asan, which operates now-suspended joint tours connecting South Korea and Mount Kumkang in North Korea.

The KOSDAQ index also closed at 613.33, down 13.72 points, or 2.19 percent, from the previous day.

The Korean won-dollar exchange rate closed at 1,199 won, up 4 won the previous session's close.

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