South Korean Markets Tumble as Fed Signals Hold on Rate Cuts and Political Turmoil Unfolds
1min read On Friday, South Korean stocks witnessed consecutive declines, deepening losses for the week, as the Federal Reserve signaled a slowdown in interest rate cuts. The Korean won also depreciated against the US dollar, reaching a 15-year low. The benchmark Korea Composite Stock Price Index (KOSPI) fell by 34.26 points, or 1.41%, closing at 2,401.67, marking a weekly decline of 3.6%, the worst since mid-November.
Contributing to the market's downturn, major stocks such as Samsung Electronics fell by 1.51%, and SK Hynix declined by 3.37%. Other significant players including LG Energy Solution, Hyundai Motor, and Kia Motors also reported drops of 1.34%, 2.12%, and 0.70% respectively, highlighting the broad-based pressure across sectors.
The currency market echoed these bearish trends, with the Korean won plummeting to its weakest level since March 2009, closing at 1,451.5 per dollar, down 0.85% from the previous session. The decline intensified after the Fed chair's comments underscoring the conditional nature of future rate cuts on sustained inflation reduction, amplifying demand for the dollar and consequently pressuring the won.
The political backdrop compounded the economic strains, with domestic instability following the impeachment of President Yoon Suk-yeol, adding layers of unpredictability to South Korea's economic outlook. This has led to a continued decline of the won, which has depreciated by 3.9% since December and is on track for its worst annual performance since 2008.
The bond market was not immune to these developments either, as the yield on the three-year government bond rose, indicative of growing concerns over interest rate trajectories. This reflects investor apprehension about the economic landscape and the future monetary policy in light of the evolving global and domestic circumstances.