Korean markets back in downward spiral amid recession fears

2020.03.23 11:59:46 | 2020.03.23 15:52:30

[Photo by Lee Chung-woo]이미지 확대

[Photo by Lee Chung-woo]

Speculation about a looming recession has spooked the Korean market on Monday, erasing the brief rebound on Friday from a $60 billion currency swap deal with the United States and dashing hopes for any relief from additional stimuli actions.

The country’s benchmark Kospi opened Monday 5.86 percent lower at 1,474.45, and the junior Kosdaq also 5.18 percent down at 443.51. Five-minute suspension on program selling was imposed for Kospi and Kosdaq futures in the morning trade.

The Kospi finished the day 5.34 percent down at 1,482.46, wiping out nearly all its gains on Friday. The Kosdaq also closed 5.13 percent lower at 443.76.

Hint of more stimuli actions – stock stabilization fund and funding plans up to $21 billion – and second supplementary budget failed to stop the downward spiral.

The Korean won also dropped to 1,266.5 against the U.S. dollar, sliding 20 from the previous session.

Bond prices declined as panicky cash-out revived.

The three-year government bond yield rose 5.5 basis points to 1.162 percent by midday Monday, and the five-year note up 6.9 basis points to 1.457. The yield on the 10-year bond also gained 11 basis points to 1.721 percent, the 20-year bond up 12.6 basis points to 1.789 percent, and the 30-year bond up 10.3 basis points to 1.748 percent.

The price of gold came at 60,677.37 won per gram, up 1 percent in Seoul.

Global markets also have tumbled on growing fears about the fast spread of COVID-19 across the U.S. and Europe and their impact on the global economy as multiple stimuli measures failed to convince investors.

The Dow Jones Industrial Average closed Friday with a 4.5.5 percent drop, along with the S&P 500 and Nasdaq falling 4.34 percent and 3.79 percent, respectively. U.S. stock futures fell 5 percent on Sunday evening (local time), hitting their “limit down” levels.

“Investors are still fearful of the virus impact to the global economy as the number of confirmed cases are rising fast in the U.S. and Europe,” said Seo Sang-yeong, an analyst at Kiwoom Securities. “Anxieties could worsen if manufacturing data from U.S. and Europe back their concerns,” he added.

By Lee Ha-yeon

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