Korean Stocks Halt Trading as Key Index Slumps 10%; Won Fallsgreenspun.com : LUSENET : Grassroots Information Coordination Center (GICC) : One Thread
Mon, 18 Sep 2000, 1:31am EDT
Korean Stocks Halt Trading as Key Index Slumps 10%; Won Falls
By Heejin Koo
Seoul, Sept. 18 (Bloomberg) -- The Korea Stock Exchange briefly halted trading as its key index lost a tenth of its value in a day after Ford Motor Co.'s decision to scrap a $7 billion bid for Daewoo Motor Co. threw into doubt plans to reform the nation's ailing financial industry.
The exchange halted trade for 20 minutes starting at 1 p.m. local time, after the benchmark Kospi index fell 10.2 percent, triggering the automatic suspension. The index extended losses as trade resumed, plunging to its lowest in more than 18 months, as the won slid to a 3 1/2 month low.
``We didn't expect the fall to be fast as this,'' Noh Keun Hwan, head of research at Tong Yang Securities Co. in Seoul.
The Kospi index tumbled as much 12 percent to 554.87, falling below 600 points for the first time since March 1999. The won posted its biggest single-day slide since January, tumbling 1.2 percent to 1,131.95 to the U.S. dollar. Benchmark three-year corporate bond yields rose five basis points to a three- week high of 9.01 percent.
Chohung Bank and Hanvit Bank, Daewoo Motor's two major creditors, plummeted by their 15 percent daily limit for a second day, as did Kookmin Bank, Korea's largest commercial lender. A sub- index that tracks Korean banking shares slid 12 percent -- its biggest one-day decline on record.
``Banks shares are crumbling on concern that financial institutions will suffer the most from the collapse in talks,'' said Lee Jong Weon, fund manager at Korea Investment Trust Co. who manages 800 billion won ($708 million).
``The automaker will probably be sold at a lower price than Ford's bid, which means greater risk for creditor banks, which have already suffered great losses from their exposure to Daewoo.''
Daewoo Motor had 18.2 trillion won of debt at the end of June, up from 15.5 trillion won a year earlier. Its debts were 450 billion won greater than its assets.
-- Carl Jenkins (Somewherepress@aol.com), September 18, 2000
There's some really grave news here. When the markets "open sharply lower," when their currency falls 1.2% in a single day, when their market values drops more than 10% in a single day and their "bank shares are crumbling"--well, this is a formula that does not make for optimism.
-- JackW (email@example.com), September 18, 2000.