KOSPI collapse nearly 3% over inflation fears from U.S.

It is turning into a Black Monday as stock markets in Asia including Korea plummeted by about 3 percent over inflation fears coming from the United States. The concerns over monetary tightening to prevent inflation are causing a continuing fall in stock and bond prices, as well as the won’s value against dollar. Some say the Korean economy, which is already battered by the so-called three highs—high interest rates, a strong dollar and high inflation—is in an alarming situation.

The Kospi closed at 2,504.51 on Monday, down 3.52 percent from Friday's close. It was the biggest dip in one year and 10 months when the stock market plummeted 3.66 percent due to the resurgence of Covid-19 on August 20, 2020. The Kosdaq also plunged 4.72 percent to 828.77, which was the lowest level since it dropped by 7.09 percent on June 15, 2020.

Other Asian stock markets also tumbled: Japan’s Nikkei index fell 3.01 percent, Taiwan’s TAIEX index registered a drop of 2.36 percent, and China’s SSEC index lost 0.89 percent.

The value of won and treasury bond prices declined. The local currency ended at 1,284.0 won against the U.S. dollar, surging 15.10 won from the previous session's close. It was the biggest increase in one year and four months since it was down 15.7 won on Feb. 26. The 3-year Korean treasury bond yield closed at 3.514 percent, hitting another new high in 10 years and two months since closing at 3.54 percent of April 6, 2012. Prices for treasury bonds go down when their yields go up.


Yoo-Hyun Kang yhkang@donga.com