Foreigners Dump Korean Stocks to Buy Dollars
The Korean won-U.S. dollar exchange rate surged 40 won on March 19, reaching the highest point in 11 years. The exchange rate soared to as high as 1,296 won per U.S. dollar at one time as a large portion of the 13 trillion won that recently left the stock market was used to hoard U.S. dollars.
The won-dollar exchange rate started with a jump of 11.3 won on the opening of the foreign exchange market with the New York Stock Exchange tumbled once again on the previous day. The exchange rate continued to rise. As the KOSPI plunged more than 8 percent and foreigners withdrew from the Korean stock market, it jumped by 50.3 won to 1,296 won. This peak was the highest rate since July 14, 2009 (1,303 won), and the closing price of 1,285.7 won was also the highest in about 11 years.
According to Korea Exchange, foreigners sold a total of 619 billion won worth of stocks on the day. They dumped a total of 9.5 trillion won worth of stocks in this month alone. Market watchers said that foreigners sold off a large proportion of their Korean currency holdings to buy U.S. dollars on March 19. Before that day, the exchange rate only rose by 10 won to 20 won a day for six days running, but on March 19, the rate uptick exceeded 50 won, which was close to a market panic.
Market analysts say it is a matter of time that the exchange rate reaches the 1,300 won point. Foreign funds outflow has been especially prominent in Korea. Yuanta Securities said that about US$5.8 billion left the Korean stock market from March 1 to 13. The amount dwarfed US$3.82 billion in India, US$3.175 billion in Brazil, US$1.295 billion in Thailand and US$6,722 billion in Taiwan.
Meanwhile, the KOSPI index plunged 8 percent on the day, falling below the 1,500 line. The KOSDAQ index also plummeted by more than 11 percent. At one point during the session, a circuit breaker was triggered in the KOSPI stock market and the KOSDAQ market for 20 minutes following March 13.