SEOUL, December 27 (AJP) - Investors' hopes for a year-end "Santa rally" in South Korea have fizzled as economic stagnation, political turmoil, and a plummeting value of the Korean currency won hammer the financial markets.
The KOSPI stock index tumbled 1.59% on Wednesday, falling to 2,391.00 during early trading and breaching the key 2,400 level. Losses were widespread, with all but one of the top 10 market-cap stocks - SK Hynix - suffering declines.
With just two trading days left in the year, the market is now on track for a six-month losing streak, a grim milestone not seen since the global financial crisis in 2008. It’s only the third time the KOSPI has endured a half-year of consecutive declines, with previous instances tied to the dot-com crash in 2000 and the 2008 financial meltdown.
Analysts had been optimistic that the holiday season could bring a Santa rally, traditionally a year-end market surge. But instead, the KOSPI is poised to mark its longest decline in over a decade, leaving investors in the cold.
Driving the market's struggles is the surging won-dollar rate, which is teetering near the 1,500 mark. On Tuesday, it briefly surpassed 1,480 won in Seoul's foreign exchange market, a high not seen since March 2009, during the height of the global financial crisis.
The sharp rise in the dollar has pushed foreign investors to sell Korean stocks for 17 straight weeks, further weakening market sentiment.
The dollar’s strength follows signals from the Federal Reserve last week that the pace of interest rate cuts in 2024 could slow. The dollar index, which measures the currency against a basket of major peers, surged past 108, hitting its highest level this year.
The fallout from President Yoon Suk Yeol’s martial law declaration has exacerbated the situation, fueling political instability and compounding the market’s woes.
The uncertainty surrounding the government’s leadership has shaken confidence among investors, creating a perfect storm of challenges for South Korea’s economy.
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