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Archive for April 29th, 2010

Stock Market Tumbles on ‘PIGS’ Shock

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Stocks continue to tumble😦 and the bearish mode continues.  Damn you Greece!!

By Yoon Ja-young
Staff Reporter

The local financial market tumbled Wednesday on the back of the overnight crash in the U.S. and European markets triggered by the downgrading of sovereign ratings for Greece and Portugal over their fiscal problems. S&P pulled down its sovereign rating for Greece to BB+ with a negative outlook from BBB+ (negative), and Portugal to A- (negative) from A+ (negative), Tuesday, on concerns over their fiscal deficits.

Analysts, however, expect the Seoul bourse will turn bullish after undergoing a short-term correction as economic fundamentals are improving here.

The main KOSPI closed at 1,733.91 Wednesday, dropping 15.64 points, or 0.89 percent, from the previous day, while the local currency lost much ground against the greenback.

The concern over the fiscal deficit of the so-called PIGS countries ― Portugal, Italy, Spain and Greece ― has been the biggest threat to the global financial market since it began to recover from the credit crunch.

Stocks tumbled in major markets on fear that a new credit bust could be triggered from Southern Europe. U.S. stocks tumbled 1.9 percent, while those in the U.K. and Germany fell 2.6 and 2.7 percent, respectively.

PIGS countries, of course, took the brunt of the fall. Greece stocks plunged 6 percent, Portugal 5.4 percent, Spain 4.2 percent, and Italy saw a 3.3 percent dip.

Both foreign and institutional investors dumped stocks, while small investors bought 381.5 billion won worth.

The Financial Supervisory Service (FSS), however, said Korea is safe from the troubles in Greece and Portugal as its exposure to the two southern European countries is exceedingly small.

“Local financial companies’ exposure to Greece and Portugal totals only $400 million as of the end of 2009, or 0.76 percent of total exposure overseas,” the regulator announced.

It added that local financial companies lent only $25 million to Greece, and they haven’t lent any from Portugal.

“Since exposure or lending to Greece and Portugal is small, the effect on local financial companies is expected to be limited,” the regulator said.

However, the FSS added that it would continue monitoring the market as the fiscal crisis in southern Europe could rattle the global financial market.

Park Sang-hyun, an economist at Hi Investment & Securities, said that fiscal problems in these countries are likely to continue. “The fundamental problem is that the fiscal trouble isn’t likely to be solved unless they implement groundbreaking fiscal reform. As the IMF estimated, the fiscal deficit of PIGS countries isn’t likely to see a major improvement this year,” he said.

He added that acceleration of the weakening euro is a more serious problem. “The euro reached 1.31 dollar, falling to the year’s lowest rate. Though Greece and Portugal play a small part in the euro economy, they can have a major impact on global liquidity if their fiscal risk triggers concern over the fall of the euro.”

As global liquidity turned to safe assets, the won turned weak against the greenback. The local currency closed at 1,118.70 won per dollar Wednesday, losing 8.6 won from the previous day.

Analysts expect the Seoul stock market to recover, citing positive fundamentals of the economy.

“Korea is showcasing a solid recovery that is driven by its export competitiveness, strong execution of government stimulus measures in areas where needed, such as infrastructure, and stable consumption,” said Sharon Lam, an economist at Morgan Stanley, expecting 5 percent GDP growth for the country this year.

The country’s central bank reported 7.8 percent preliminary real GDP growth for the first quarter.


Written by recruiterinkorea

April 29, 2010 at 11:27 am

Posted in Uncategorized