Evils of Yuan

 

According to Bloomberg, foreign investors net-sold stocks worth US$9.254 billion in the seven emerging Asian markets including Korea in November and December last year. During the period, they recorded a net sale of US$4.02 billion in the Korean stock market alone. In the KOSPI market, their disposal of stocks amounted to no less than 4.4 trillion won or so between December 2 and January 11.

This situation is attributable to the ongoing panic in the Chinese stock market and uncertainties regarding emerging economies. The daily disposal amount, which decreased to billions or tens of billions of won late last year, has increased back to hundreds of billions of won. On January 11 alone, foreign investors posted a net sale of 417.9 billion won, second only to the net sale of 538.2 billion won recorded on November 30 last year.

In addition, the Korean currency has depreciated in synchronization with the Chinese currency (yuan) since last year, causing foreign investors to reduce the share of their Korean stocks. If the value of the U.S. dollar continues to rise rapidly, they can rush out of the Korean stock market to leave devastating repercussions.

On January 11, the won-dollar exchange rate exceeded 1,210 won per U.S. dollar for the first time in 66 months, resulting in a downturn in the stock price index.

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