KOSPI Plummets Over 3% Intraday... All Three Major US Stock Markets Also Decline

Global Financial Markets Also 'Infected'

[Asia Economy Reporter Oh Joo-yeon, New York=Correspondent Baek Jong-min] Fear of the novel coronavirus infection (Wuhan pneumonia) in China has swept through global financial markets. The KOSPI, which had surpassed last year's high and was approaching the 2300 mark, plunged more than 70 points in a single day, marking the largest drop since May last year.

According to the Korea Exchange on the 28th, as of 11:25 a.m., the KOSPI recorded 2175.00, a plunge of 3.17% compared to the previous trading day. This drop is the largest since May 9 last year (-3.04%). The KOSDAQ index fell to 661.54 (-3.51%), marking the largest drop since the sharp 3.39% decline on the 8th.

In particular, Chinese consumer stocks, which had surged significantly this year due to expectations of lifting the Hanhanryeong (ban on Korean Wave), fell one after another. Cosmetics, duty-free, casino, and travel stocks showed intraday declines of more than 10%, experiencing the steepest drops. Semiconductor-related stocks also fell as profit-taking sales poured out. Samsung Electronics, which had been hitting new highs daily above 62,000 won, dropped to 59,000 won, down 2.96% from the previous day, and SK Hynix also fell 2.74%, breaking below the 100,000 won mark to 96,000 won. The rapid contraction of risk asset preference due to concerns over the spread of the novel coronavirus and the resulting worries about economic activity slowdown are also believed to have influenced the 3.91% drop in the Philadelphia Semiconductor Index.

On the previous day (local time) at the New York Stock Exchange (NYSE), the Dow Jones Industrial Average closed at 28,535.80, down 1.57% (453.93 points). The S&P 500 index fell 1.57% (51.84 points) to 3,243.63, and the Nasdaq index dropped 1.89% (175.60 points) to 9,139.31. This is the largest decline since October last year.

The yield on the 10-year U.S. Treasury fell to 1.60%, marking the lowest level since October 10 last year. Gold prices on the New York Commodity Exchange rose 0.4% ($5.50) to $1,577.40 per ounce, reaching the highest level in over six years. International oil prices continue to decline. On the New York Mercantile Exchange (NYMEX), March delivery West Texas Intermediate (WTI) crude oil closed at $53.14 per barrel, down 1.9% ($1.05) from the previous day.

In the Seoul foreign exchange market, the won-dollar exchange rate opened at 1,178.5 won, up 9.8 won from the previous trading day, fluctuating in the high 1,170 won range.

In the securities industry, it is viewed that a short-term shock to the global economy and stock markets due to this incident is inevitable. However, the consensus remains that the possibility and trend of stock market recovery due to expectations for economic stimulus and corporate earnings improvement throughout this year still hold.

Lee Kyung-min, a researcher at Daishin Securities, said, "Considering that Korean leveraged (3x) ETFs listed in the U.S. have plunged more than 12%, a short-term shock to the KOSPI is inevitable, and the index could sharply fall to the 2150-2170 range." However, he emphasized that past infectious disease outbreaks have never changed the direction of the global stock market.

Seo Sang-young, a researcher at Kiwoom Securities, predicted, "Although a short-term correction in the Korean stock market is inevitable, the adjustment range is expected to be limited as expectations for Federal Open Market Committee (FOMC) Chairman Powell's remarks, corporate earnings, and the Chinese government's actions after the Lunar New Year are factored in."