High Exchange Rates, Political Instability, and Dividend Drops... KOSPI Falls Below 2400 Mark

The won-dollar exchange rate surpassed the 1,480 won mark, and with increasing political uncertainty, the KOSPI fell below the 2,400 level on the 27th. Stocks that faced ex-dividend day (the day when dividend rights disappear) also saw significant declines.

Dealers are working in the dealing room at the Hana Bank headquarters in Euljiro, Seoul, while exchange rates and other indices are displayed on the electronic board. Photo by Huh Young-han

As of 1:16 PM that day, the KOSPI was trading at 2,395.48, down 34.19 points (1.41%) from the previous day. The index started at 2,419.46, down 10.21 points (0.42%), and the decline has been widening. Currently, foreigners sold stocks worth 178.3 billion won, and institutions sold 157.7 billion won worth. Individuals bought stocks worth 268.6 billion won on their own.

At the same time, the KOSDAQ index recorded 662.55, down 13.09 points (1.94%) from the previous session. The index started at 674.30, down 1.34 points (0.20%). Foreigners and institutions net sold stocks worth 45.7 billion won and 122.2 billion won, respectively. Individuals purchased stocks worth 174.5 billion won.

On that day, the won-dollar exchange rate's low was 1,465.50 won, and the high was 1,486.70 won. Jaewon Lee, a researcher at Shinhan Investment Corp., said, "The Democratic Party of Korea filed an impeachment motion against Prime Minister Han Duck-soo, acting on behalf of the president, which foreign media reported as a political risk concern. The won-dollar exchange rate, which has been hitting daily record highs, reached 1,480 won during the session," adding, "Foreigners and institutions are net selling both spot and derivatives. Funds mainly from financial investments, which had been net buyers for three consecutive trading days, also switched to net selling today."

The stock price decline of companies that set the year-end as the dividend record date is also steep. On the ex-dividend day for December-settlement corporations, Hanil Cement (-11.14%), Samsung Securities (-9.79%), Hyundai Elevator (-8.87%), and Kiwoom Securities (-8.84%)?stocks classified as high-dividend stocks?experienced large declines. The researcher said, "Today is the ex-dividend day, so even if you buy stocks, you no longer have dividend rights. Dividend stocks that have not changed their dividend record date are falling."