South Korean assets are hit hard from stocks to its currency because investors are fleeing the export-reliant nation because of the fear of a global recession.
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The index of the Kospi fell 3% on Monday to its lowest close in more than two years, leading to declines in Asia. The won, by far the worst performing in the region this quarter, fell to the lowest level since March 2009 against the dollar. The yield of government bonds went up across the curve.
In recent months, the Korea reliance and strong trade ties with China have backfired as sources of weakness, in stark contrast to the earlier days of the Pandemic when they helped to buttress the economy. The stock market's relatively heavy tech exposure has proved costly in an environment of rising rates and a stronger dollar.
In Monday s session, Samsung Electronics Co. and LG Energy Solution Ltd. were the biggest drags on the Kospi.
South Korean stock markets are sensitive to external economic factors and have reacted excessively to global economic uncertainties, according to Seo Jung-Hun, an analyst at Samsung Securities Co. The won's fall against the dollar is not favorable for local markets. Foreign investors have sold a net $13.7 billion of Korean shares this year, according to exchange data compiled by Bloomberg. The Kospi has gone for its worst year in a row since 2008, and it is down 25% this year.
Korean authorities spent years building up foreign exchange reserves to protect the won in times of intense foreign selling after going through the Asian financial crisis in 1997 -- 1998. Policy makers have issued a series of warnings recently to curb speculative bets, but the impact has been limited due to the dollar's rise.
The Bank of Korea has hiked interest rates at every policy meeting since April, including a first-ever half point increase. On Monday, the governor Rhee Chang-yong said rates aren't the only way to deal with a foreign-exchange crisis and Korea should encourage some of its overseas investments to return home.
The Kosdaq index fell 5.1% to the lowest since May 2020. Three-year government yields went up 33 basis points to 4.46% in the bond market, which was also affected by a tumble in global bonds.
The won's latest slide is excessive for some in the market, considering that the country's fundamentals are relatively solid.
The current-account balance in Korea has been in surplus for a long time this year, and its latest inflation is at 5.7%, which is lower than in the US and some other developed countries.
Kong Dong Rak, fixed-income strategist at Daishin Securities Co., said that the won's movement appears extreme as there are no signs of risks that make South Korea stand out from other countries. Then you can find success at work, match your job with your personality, and find success at work.