Korea: Fears Rising on a Second Financial Crisis

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Korea: Fears Rising on a Second Financial Crisis

Some experts warned Monday that the situation on the stock market is reminiscent of the panic that hit during the financial crisis in 1997, and cautioned that it was too early to say whether it had bottomed out or not. In 1998 the Korea Ordinary Stock Price Index (KOSPI) fell to 506 on November 21 when the government applied for and IMF bailout, 37% off the year's previous low. It continued to fall a further 30.7% in one month to 350 and finally bottomed at 280 on June 8, 1998.

In November 1997 overseas investors sold shares valued at W590.2 billion, and as of September 15 this year they have disposed of some W997 billion in stock.

Shin Song-ho of Daewoo Securities differs with most analysts pointing out that the exchange rate is stable, business is more solid and the cash crunch is limited to certain companies. He added that the exchange rate in 1997 rose a total of 60% to W1,850 to the dollar, and that interest rate rose from 11.8% to 14.5% on the day the loan was requested and one month later reached 31%.

However, Samsung Investment and Trust's Kim Ki-hwan said that the first crisis was a foreign exchange one and so was short term, but this time around it is due to delayed restructuring and could prove to be long term and more serious.

(Lee Ji-hoon, jhlee@chosun.com)


-- Carl Jenkins (Somewherepress@aol.com), September 19, 2000

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