KOSPI Falls to 1400 on Won Strength

The recent rise of the won caused the Korea Composite Stock Price Index (KOSPI) to tumble below the 1,400-level yesterday.

On December 8, the KOSPI dipped by 19.87 points (1.41%) compared with the previous day and closed at 1,390.43.

The index has dropped below the 1,400-level for the first time in about 25 days since November 13.

KOSPI has dropped for five consecutive trading days and lost 45 points total.

Deteriorating investment sentiment has resulted from the recent strong won against the dollar and sellout trends of foreign investors, which triggered a bad supply-demand situation in the Seoul stock market.

In particular, foreign investors contributed to the large drop by turning to short- positions, selling export-oriented stocks worth 13.52 billion won, which were directly affected by the recent won-dollar rate changes.

Samsung Electronics’ stock price fell by 15,000 won (2.40 percent) to finish at 611,000 won, while Hynix and LG.Philips LCD also plunged 3.71 and 2.67 percent, respectively. Hyundai Motors fell for five straight days, reaching below 64,900 won per share during the trading session.

“As institutional investors short-covered their funds and foreign investors turned to sellout trends, the bad supply-demand situation and the won’s appreciation caused a larger drop in the stock market index,” said Hong Seong-guk, chief of Research Center at Daewoo Securities.

ssoo@donga.com