KOSPI falls below 2,000 amid strong dollar, weak yen

The Korea Composite Stock Price Index (KOSPI), Korea’s benchmark index, fell below 2,000 in two months due to the strong dollar and the weak yen against the Korean won. The KOSPI plummeted 28.44 points (1.41%) to close at 1,991.54 on Wednesday. It has decreased for five consecutive trading days. It is the first time that the KOSPI fell below 2,000 based on the closing prices since July 14 (1,993.88).

The KOSPI sharply declined as foreign investors sold off Korean stocks due to the continued strong dollar and the expectation of an early rise of US interest rates. Foreign investors sold 206.1 billion won (193.7 million dollars) in stocks, dragging the index down. They have sold off 990 billion dollars (930.9 million dollars) for ten trading days since Sept. 18 when foreigners began to leave the Korean stock market.

The concern that the weak yen could weaken the competitiveness of Korean exporters also dampened investor confidence. The yen was traded at 110.09 yen per dollar in the Tokyo foreign exchange market on Wednesday. The yen broke through the psychological barrier of 110 yen in about six years since Aug. 25, 2008, right before the collapse of Lehman Brothers.

Experts say that the correction of the Korean stock market will continue for some time as Samsung Electronics and other major Korean companies show weak earnings and the delay in passing bills is weakening the expectation that the economy could be revitalized after the appointment of Finance Minister Choi Kyung-hwan.