The South Korean stock market is facing a shock comparable to that it experienced during the global financial crisis in 2008.
The Korea Composite Stock Price Index (KOSPI) dropped from 2,242.17 points on Feb. 17 to 1,987.1 points on Feb. 28, falling below 2,000 points in about six months. The KOSPI 200 Volatility Index reached 33.11 on Feb. 28, hitting a 99-month high. Back in 2008, the index lost no less than 20.49 percent from Oct. 20 to Oct. 24. Although the latest drop is still not comparable to that plunge, the index is likely to keep falling for a while.
Under the circumstances, more and more investors are flocking to the bond market. The three-year treasury rate fell from 1.51 basis points to 1.136 basis points from Feb. 20 to Feb. 28, which means the price of the bond jumped by approximately 40 percent.
Investors’ trust in the bond market, however, is disappearing as community-level infection is continuing to spread. According to the Financial Supervisory Service, foreign investors, who increased their bonds in the South Korean market from 125.01 trillion won to 129.79 trillion won from Jan. 20 to Feb. 21, reduced the volume to 129.2 trillion won in the last week of last month.