South Korean stocks fell sharply Thursday following U.S. Federal Reserve Chair Janet Yellen’s comments on future interest rate hikes that pushed foreign investors and institutions to offload shares. The local currency fell against the U.S. dollar.
The benchmark Korea Composite Stock Price Index skidded with the start of trading and lost more ground to end the day at 1,919.52, a drop of 0.94 percent, or 18.16 points, from Wednesday’s close.
The loss comes on the heels of the main bourse dipping in the previous session after moving up earlier in the week. Trading volume was light at 216.04 million shares, with 3.28 trillion won ($3.05 billion) in turnover. Declining stocks outnumbered gainers by 527 to 257 with 88 staying flat.
Yellen said at a press conference after her first monetary policy meeting that the Fed could start raising interest rates about six months after its current expansive monetary policy comes to an end. Such a statement indicates interest rates could go up in the spring of next year, not in the summer as predicted by the market.
She added the ongoing asset purchase program will be scaled back to $55 billion a month in April from $65 billion in March.
Market watchers said while South Korean companies are not likely to be affected by the tapering of the quantitative easing, the interest rate hike comment caused jittery big-time investors to shed shares. Only private investors bought more shares than they sold in the trading session.
“The drop was caused by heightened uncertainty over rate hikes and lingering concerns related to the performance of big companies,” said Han Beom-ho, an analyst at Shinhan Investment Corp. He also said there is some confusion in interpreting Yellen’s statement that is not really different from what the market had predicted in the past.
“The market knew there would be a scaling back of the U.S. stimulus program, and 80 percent of the experts thought the U.S. will implement a rate hike next year, so her comments are not really new,” Han claimed.
He said despite the drop, the KOSPI should be able to sustain the lower 1,900 range for now.
Reflecting overall market conditions, shares of Samsung Electronics, the world’s No. 1 mobile phone maker, lost 0.55 percent to 1,262,000 won, with Hyundai Motor, South Korea’s largest carmaker, surrendering 0.65 percent to 229,500 won.
SK Telecom, the country’s largest wireless service provider, backtracked 0.70 percent to 214,000 won, with Hyundai Heavy Industries, the world’s biggest shipbuilder, dropping 1.47 percent to 201,000 won.
Stock prices of Kia Motors reached 56,900, down 0.35 percent from the day before, with Hyundai Mobis, the country’s leading auto parts manufacturer, falling 1.64 percent to 299,000 won.
POSCO, on the other hand, gained 0.35 percent to 287,500, while LG Electronics gained 0.48 percent to 62,700 won.
The local currency ended at 1,076.20 won to the U.S. dollar, down a sharp 5.70 won from the previous session. (Yonhap)