The benchmark Korea Composite Stock Price Index (KOSPI) fell below the psychologically important 2,000 mark on Oct. 29. It was less than a week since the 2,100 point collapsed last week.
The main stock index dropped 31.10 points, or 1.53 percent, to close at 1,996.05. Foreign and retail investors dumped stocks. It is the first time in 22 months that the index finished below 2,000 level since Dec. 7, 2016 when it marked 1,991.89.
The volatility of the Seoul bourse increased recently as the U.S. midterm elections scheduled for Nov. 6 approached. Persisting concerns over the downturn of the Korean economy due to the continuing trade tensions between the United States and China also weighed on the bourse. Fears of a stock market collapse led individual investors to dump their stocks.
The financial authorities held a financial market inspection meeting before the market opened and announced a plan to raise 500 billion won to stabilize the capital market, but it was not enough to stop the bearish trend.
"The KOSPI seems to have plunged due to the escalating U.S.-China trade war and the strengthening of the U.S. Federal Reserve’s tightening policy," said Kwak Hyun-soo, head of the investment information team at Shinhan Financial Investment. "The KOSPI is unlikely to drop sharply from 1,950," he said. "We are predicting that it will move between 1,900 and 2,150 in November."
"The Seoul bourse was pulled down by the decline of the U.S. stock market since early October," said Hong Choon-wook, head of investment strategy at Kiwoom Securities Co. He noted that U.S. market interest rates soared and the U.S. dollar gained strength after Fed Chairman Jerome Powell indicated more hikes were coming on Oct. 3 by saying, “We’re ‘a long way’ from neutral on interest rates.”
"Market volatility is expected to increase until early November. The Fed's aggressive interest rate hike and uncertainty ahead of the U.S. midterm elections will have a negative impact on the stock market," said Hong. He expected the KOSPI to move between 1,950 and 2,150 next month.
Trading volume was moderate at 416 million shares worth 6.13 trillion won (US$5.4 billion), with losers overwhelming winners 813 to 67.
The South Korean currency closed at 1,141.40 won against the U.S. dollar, up 0.50 won from Friday's close.