Financial Market Facing `Triple Misfortunes`

As the war between the US and Iraq looms, financial markets around the world are feeling the pinch.

The Korea Composite Stock Price Index (KOSPI) fell to around 510 points, its lowest level in 17 months and the tech-heavy Kosdaq marked its another lowest record just in 4 days. Financial markets came across unfavorable conditions including an increase in interest rates, decrease in bond prices and devaluation of the won.

International oil prices rose and stock markets in other Asian countries including Japan and Taiwan continue their downward spiral.

On Monday, KOSPI closed at 515. 24, 22.41 points (4.17%) down from last weekend. This is its lowest level since October 15, 2001 when stock markets were dealt a serious blow due to the 9.11 terrorist attacks. Almost all industries saw plunges in stock prices. That was especially true for financial markets including banks (6.17%), securities (11.5%), and insurance (7.1%) in the aftermath of the SK Global scandals and insecure atmosphere created due to growing credit delinquents.

Kosdaq closed at 34.64, 2.37 points (6.40%) down from the previous day, marking another low in 4 days.

The stock price plunge came after foreign investors net-sold stocks worth 61.9 billion and individual investors also sold their stocks worth 25.5 billion won.

On the bonds market, government bond prices rose after a drop as expectations were high that the government would come up with measures for dealing with credit card bonds, 3-year government bonds were traded at the yearly yield of 5.0%, 0.08% points down from last weekend and rose 0.02% points to 5.10% at market close.

On the foreign exchange market, the won-dollar rate closed at 1247.5 won, a 6.3 won increase. Many analysts say that unless the government comes up with strong measures to cause investors to refrain from repurchasing from the Money Market Fund (MMF) and Beneficiary Certificates for investment trust companies, a money crunch and drop in stock prices will continue.

The recent announcement of the international rating company Moody`s in which it considered downgrading Korea`s credit rating if the North`s nuclear problem is not resolved in any time soon has also added to the difficulties in the Korean financial market.

In the meantime, the Nikkei index closed at 7.871.64 yen, a 131.05 decrease. Taiwan`s stock index closed at 4,357.99, a decrease of 2.64%.

On Monday afternoon, West Texas Intermediate Crude Oil (WTI) for April was sold at 36.62 dollars per barrel, a 1.24 dollar increase from the previous weekend. Gold prices also increased 7.90 dollars (2.4%) to 344.20 dollars per ounce.

Chan-Sun Hong hcs@donga.com