On a Tuesday in October, after Seoul's markets returned from a holiday, the Korean stock market and its currency both slipped as the world's oil bill grew heavier and fears of rising prices spread across the room. Shares of the country's great technology firms led the retreat, while foreign investors quietly withdrew their capital. The central bank, having already raised rates once this year, chose to hold steady but let it be known that another tightening could arrive as early as November, and bond yields rose in response. It is a small chapter in a larger story about energy, inflation and th
Korean Stocks Slide and Won Hits 15-Month Low as Oil Surge Stokes Inflation Fears
The won sank to its weakest level in nearly 15 months
Mark
The market was closed Monday. Does that matter for how we read Tuesday's drop?
Mimi
It does. Oil had been climbing for four days, and Korean investors had no chance to react until Tuesday. So part of the 1.35% fall is a catch-up.
Luke
That's a reasonable reading, but the report doesn't actually say it. It gives the holiday and the oil rally as facts and lets us connect them. I'd treat the catch-up idea as plausible, not confirmed.
Mark
The tech names fell hardest among the giants. Samsung dropped 3.50%, SK Hynix 2.66%.
Mimi
And Naver fell 4.25%, Kakao 3.40%. Those are the biggest percentage drops mentioned.
Luke
Notice we aren't told why those companies in particular. The piece gives the numbers, not the reason.
Mark
What about the central bank? It held rates but bond yields still jumped.
Mimi
The hold wasn't the news. The signal was. A possible November hike, aimed at inflation and household debt, pushed the three-year yield up 13.0 basis points to 1.822%.
Luke
Worth stressing that it's a signal, not a decision. The bank said tightening could come as soon as November. Nothing is committed.
Mark
And the foreign selling, 821.2 billion won?
Luke
That's a one-day figure. It doesn't tell us whether it's a trend, and it doesn't tell us who sold or why.
Mimi
The inflation and retail sales numbers this week will give the next real clue.
Le Pouls
- Oil prices rose for a fourth straight day, spooking markets that had been shut while the pressure built.
- The KOSPI fell 1.35% to 2,916.38, with Samsung Electronics, SK Hynix, Naver and Kakao leading the slide.
- Foreign investors sold 821.2 billion won in shares, pulling money out of the market at speed.
- The won sank to a near 15-month low at 1,198.8 per dollar as currency and equity pressures reinforced each other.
- The Bank of Korea held rates but flagged a possible November hike, sending the 10-year yield up 8.3 basis points to 2.445%.
- All eyes now turn to this week's inflation and retail sales data to see whether the central bank will act.
On a Tuesday in October, after Seoul's markets returned from a holiday, the Korean stock market and its currency both slipped as the world's oil bill grew heavier and fears of rising prices spread across the room. Shares of the country's great technology firms led the retreat, while foreign investors quietly withdrew their capital. The central bank, having already raised rates once this year, chose to hold steady but let it be known that another tightening could arrive as early as November, and bond yields rose in response. It is a small chapter in a larger story about energy, inflation and the price of money, in which every economy must now decide how much warmth it can afford to lose.
When Seoul's markets reopened on Tuesday, October 12, after a Monday holiday, the KOSPI slid 1.35% to close at 2,916.38. At its worst it had been down nearly 2%. By day's end the Korean won had weakened to its lowest level in roughly fifteen months.
The trigger was oil. Prices had climbed for four straight days, fed by a rebound in demand that is straining energy supplies in major economies. Fears of inflation spread through global markets, and Korean stocks, having been closed while those gains built, absorbed the full shock at once.
The heaviest blows fell on the country's largest technology names. Samsung Electronics dropped 3.5% and SK Hynix 2.66%, while the platform companies Naver and Kakao fell further in percentage terms. Foreign investors, meanwhile, were net sellers to the tune of roughly 821 billion won, about $685 million.
At home, the Bank of Korea kept rates unchanged, having raised them in August. Yet it signalled that another increase could come as early as November, pointing to inflation and household debt as its targets. Bond traders reacted quickly, pushing the 10-year yield up to 2.445%.
Now attention turns to this week's inflation and retail sales figures, and to whether the central bank will follow its warning with action.
When Seoul's markets reopened on Tuesday, October 12, after a public holiday on Monday, the KOSPI index slid 39.92 points, or 1.35%, to close at 2,916.38. At its worst the benchmark had been down 1.85%. By the end of the day, the Korean won had also dropped to its weakest level in nearly 15 months.
The immediate cause was oil. Prices had risen for a fourth straight day, driven by a rebound in demand that is feeding energy shortages in major economies. That dampened global appetite for risk and fed worries about inflation, and Korean stocks absorbed the shock at once, since the local market had been shut while those gains accumulated.
The heaviest losses came among the country's largest technology names. Samsung Electronics fell 3.50% and chipmaker SK Hynix dropped 2.66%. Two platform companies that carry real weight on the index fared worse in percentage terms: Naver lost 4.25% and Kakao 3.40%.
Foreign investors were net sellers on the main board, offloading 821.2 billion won worth of shares, about $684.79 million.
The currency moved in the same direction. The won ended onshore at 1,198.8 per dollar, 0.35% weaker than its previous close. In offshore trading it was quoted at 1,199.1 per dollar, down 0.3% on the day. The one-month non-deliverable forward contract was quoted at 1,199.5.
The domestic backdrop added to the pressure. The Bank of Korea held interest rates steady on Tuesday, having raised them in August. But it signalled that another increase could come as soon as November, citing rising inflation and household debt as the targets of that tightening.
Bond traders responded after the central bank's press conference. December futures on three-year treasury bonds fell 0.41 points to 108.64. The most liquid three-year yield climbed 13.0 basis points to 1.822%, and the benchmark 10-year yield rose 8.3 basis points to 2.445%.
Investors now turn to this week's inflation and retail sales figures, and to whether the Bank of Korea follows through on the November tightening it has put on the table.
Citations marquantes
The Bank of Korea kept rates steady but flagged that further tightening could come as soon as November to curb rising inflation and household debt.— Reuters report on the Bank of Korea's Tuesday decision
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Economy & Finance