Korea’s stock market suffered major losses in the past week, hit by the credit tightening fears in China, which emerged as a fresh negative factor in addition to the U.S. policy to scale back stimulus.
Affected by the two biggest economies’ simultaneous moves toward monetary tightening, the benchmark KOSPI lost for the fifth consecutive trading session to close at 1,780.63 on Tuesday. It dropped 18.38 points, or 1.02 percent, from a session earlier.
Seoul shares dropped 119.99 points, or 6.3 percent, in a week (or five trading sessions) from 1,900.62 last Tuesday.
Samsung Electronics saw its share price fall to a nearly eight-month low to post 1.297 million won ($1,127), losing for the fifth consecutive session.
This marked the first time since Nov. 1, 2012, for the share price of Samsung Electronics to dip below 1.3 million won on the Korea Exchange.
The blue chip firm lost 15.7 percent this month due to negative views from some foreign investment banks as well as concerns over the U.S. state policy to reduce quantitative easing.
On the same day, the tech-heavy KOSDAQ also tumbled to close at 480.96, falling 27.69 points, or 5.44 percent.
Though financial authorities are taking a variety of countermeasures to ease investors’ worries, indices are worsening.
The CDS premium, a barometer for sovereign risk, for Korea climbed to 121.16 basis points as of June 24 in the New York financial derivative market, marking the highest in 11 months since it posted 122.97 basis points on July 27, 2012.
The CDS premium for Korea continued to rise over the past two months ― 69.63 bp on May 15, 80.42 on June 18 and 107.21 on June 20.
The Financial Services Commission is set to roll out a measure to encourage companies to issue mortgage bonds. There are legal grounds that allow companies to sell mortgage bonds, but the issuance has been very low as smaller businesses, with less credible assets, have failed to attract investors.
The regulator will look into easing the limit on admissions of a company’s collateral, FSC officials said.
The FSC’s move came as Korean firms have struggled to raise capital via stock and bond sales in recent months, hampered by the economic downturn and market volatility.
Companies whose debts are rated above “A” have so far raised 8.9 trillion won this year. Those with a “BBB” grade or below have secured 1.3 trillion won less than the amount raised a year earlier, according to the FSC.
Amid fear of a possible withdrawal of the easy-money policies in the United States, an abrupt liquidity squeeze in the money market could lead to massive corporate defaults here, the regulator said.
By Kim Yon-se (email@example.com