Seoul Stock Exchange seen likely to feel N.Y. paingreenspun.com : LUSENET : Grassroots Information Coordination Center (GICC) : One Thread
Seoul Stock Exchange seen likely to feel N.Y. pain
Last week's sharp drop in the U.S. stock market is likely to have a negative impact on the domestic bourse since local stock prices have been moving in sync with U.S. share prices, industry watchers said yesterday.
In the worst case, the U.S. stock crash is feared to prompt foreign investors to become jittery and flee the domestic market, unleashing panic selling and catapulting local stocks into a free fall.
"The degree of the fallout from the U.S. stock price tumble is yet to be seen," an analyst said. "But domestic stocks are highly likely to fall as most of index-related large caps are tech stocks."
In particular, the domestic bourse may take a beating if foreign investors cut down on their holdings of index-related stocks and continue to sell, with domestic institutional investors also remaining on the selling side, he said.
In that case, the possibility cannot be ruled out that the composite stock price index, or the Korean Stock Price Index (KOSPI), may drop below a strong psychological resistance level of 780, he said.
Last Friday, the KOSPI plunged 36.12 points from the previous day to 800.89, the lowest level this year, as foreign investors net-sold domestic stocks worth 240 billion won.
But other analysts predicted that the domestic bourse might avert the worst-case scenario though the U.S. stock price fall is surely to affect domestic stocks.
Their prediction is based on the fact that foreign investors are still confident about the prospect of the Korean economy and domestic stock prices have already gone through a period of correction.
Also lending power to their rather optimistic prediction are such favorable factors as the expected inclusion of Korea in the Financial Times index, a possible upgrade by Moody's Investors Service of Korean banks' credit ratings, improved performances of domestic companies and economic benefits from the June South-North summit. (KYS)
-- Carl Jenkins (Somewherepress@aol.com), April 16, 2000