This article was reprinted from the Korea Times / Biz / Finance
08-10-2007 17:15
KOSPI Falls 4.2% on Subprime Woes
By Yoon Ja-young
Staff Reporter
The Seoul bourse suffered the third biggest one-day fall in its history Friday, tracking declines in global stock markets over deepening and spreading U.S. subprime mortgage woes.
The benchmark KOSPI closed down 80.19 points, or 4.2 percent, at 1828.49. It is the third biggest fall after a 93.17 points fall on April 17, 2000, and an 80.32-drop on July 27.
Analysts called it “Black Friday.” BNP Paribas, a global bank based in France, renewed fears about the subprime mortgages by freezing three funds investing there. The bank said they would not allow investor redemptions until they properly evaluate the funds.
The announcement pulled down global markets. The Dow Jones industrial average saw its biggest plunge since Feb. 27, falling 387.18 points, or 2.83 percent, to 13,270.68. The DAX-30 Index of Germany and France’s CAC-40 dropped over 2 percent, and London’s FTSE-100 fell 1.7 percent. Japan’s Nikkei 225 index fell 2.58 percent, and Taiwan’s Weighted Price Index fell 2.7 percent.
Analysts said it will take time for the market to determine whether the drop was based on fundamental economic problems or confined to the financial sector.
Shin Sung-ho, head of research at Dongbu Securities, wasn’t pessimistic about Seoul stocks. He said that an additional fall wouldn’t be as huge as the subprime shock has been already factored in prices.
“The drop seems enormous in terms of points, but it isn’t that disastrous in terms of percentages. The corporate earnings outlook around the world is okay, and the good news is that central banks are coping with the subprime mortgage shock quickly,” Shin said.
Stocks fell across the board but it was especially sharp for financial stocks. Securities companies recorded 7.36 percent plunge, while machinery, steel, and retail stocks also saw over a 5 percent drop.
Central banks of Europe, Japan and the U.S. Federal Reserve pushed cash into the money market amid the decline. The Ministry of Finance and Economy also held an emergency meeting Friday, to examine local and international financial markets.
Samsung Electronics closed at 603,000 won, down 18,000 won, and Hyundai Heavy Industries fell 24,000 won to close at 324,000 won. KOSPI lost 39.6 trillion won of its market cap during the day.
chizpizza@koreatimes.co.kr
