Severe Decline
On February 11, KOSPI lost 2.93% or 56.25 points to close at 1,861.54 points. The decrements were the largest since May 18, 2012, when the index fell 3.40% or 62.78 points. The index started at 1,872.68, down 2.35% from the previous trading session, on February 11 and began to plummet, dipping below 1,860 points during the session. KOSDAQ lost 4.93% and closed at 647.69 as well, showing the most severe decline in about 52 months.
The panic in the stock market can be attributed to the global stock market downturn led by Japan and the shutdown of the Kaesong Industrial Complex in the wake of North Korea’s latest missile launch. Federal Reserve Chair Janet Yellen, in addition, said on February 10 that the U.S. economy has potential risk factors while hinting at a delay in additional interest rate hike.
Under the circumstances, some experts point out that KOSPI will be able to show at least some recovery based on the delay. “The global economic recession and the European financial crisis are rather unlikely for the time being and the Korean stock market can enjoy some foreign exchange effects for now,” said Lee Kyung-min, research analyst at Daishin Securities, continuing, “KOSPI is unlikely to fall below 1,850 points.”
The others are quite pessimistic, though. “With global stock markets becoming more and more bearish, the Korean market is expected to move around 1,800 points, failing to defy the downward pressure rooted in market uncertainties” said Kim Dae-joon at Korea Investment & Securities, adding, “Still, the possibility of a sharp decline is rather low in view of the Federal Reserve chair’s remarks and expectations for the FOMC meeting scheduled for March.” Ryu Yong-seok, head of the Investment Strategy Team of Hyundai Securities, mentioned that 1,850 points cannot be a psychological barrier because it assumed a lower level of volatility. “The actual barrier can be much lower than thought in view of all the concerns regarding the current financial market conditions.”