Meager External Impact
The Korean financial markets fared well in spite of the concerns that the crisis in Argentina could spread to emerging countries as a whole. This shows that the economic fundamentals of Korea are now much more robust than during the Asian Financial Crisis of 1997.
The won-dollar rate closed at 1,083.60 won per US dollar on January 27, gaining just 3.2 won from the previous session. The rate soared to 1,087.70 won during the early hours of that day, but exporters sold the US dollar ahead of the New Year’s holiday season, and it dipped down to 1,081.70 won once before the end of the session. The movement was quite different from those in the other emerging markets.
The Korea Composite Stock Price Index (KOSPI) managed to remain over the 1,900 point mark, too. It closed at 1,910.34 points on that day, losing 1.56% from a day ago. Foreign investors sold no less than 514.6 billion won (US$477.4 million) of shares on January 27 alone. The index dipped below 1,900 upon the start of the session, but institutional and individual investors continued their purchases to raise the index to slightly below 1,920. The latter cut their purchases right ahead of closing, though.
Meanwhile, other Asian stock markets could not avoid a significant drop. The NIKKEI 225 Index lost 2.51% to 15,005.73. The 15,000 point mark was broken for the first time in two months during the session, due to the announcement that Japan’s trade deficit surpassed 11 trillion yen (US$107 billion) last year to set a new record. The Indonesian bourse lost 3% during that day, and the Indian market, which showed relatively stable movement since the inauguration of Reserve Bank of India governor Raghuram Rajan, lost approximately 1.5%. The drops amounted to about 2% in Thailand and 1% or so in China.
The foreign currency markets fluctuated as well. The Japanese yen rose to 101.77 yen per US dollar in the London Exchange, as investors flocked to risk-free assets. The figure is the highest in the last seven weeks.
“The Korean stock market fared pretty well, allowing for the over 5% drop of the Dow Jones Index,” said a foreign currency market insider, adding, “The won is falling at a rapid pace these days, but the Korean economy can endure that pace, which means that it is less exposed to the risks coming from the other emerging countries.”