Rate hike fears send Seoul stocks to 19-month low; Korean won sharply dips

 South Korean stocks crashed to a 19-month low Monday as high inflation sparked fears of a potential aggressive monetary tightening in the U.S. and a slowdown in global economic growth. The local currency fell sharply against the U.S. dollar.

The Korea Composite Stock Price Index (KOSPI) lost 91.36 points, or 3.52 percent, to close at 2,504.51, extending losses for the fifth consecutive session. It is the lowest figure since November 13, 2020, when the KOSPI closed at 2,493,97 points.

Trading volume was moderate at 622.42 million shares worth 9.61 trillion won (US$7.48 billion), with decliners far outpacing gainers 881 to 42.

Foreign investors and institutions sold a net 500.35 billion won and 219.2 billion won worth of shares, respectively, while retail investors bought a net 668.76 billion won.

“Investors were worried about the worse-than-expected U.S. consumer prices for May, which sparked fears of a global economic recession,” Seo Sang-young, an analyst at Mirae Asset Securities Co., said.

“Volatility is expected to continue in the run-up to the Federal Reserve’s interest rates-setting meeting this week,” he added.

U.S. shares tumbled on Friday after consumer prices for May rose 8.6 percent, the highest level since 1981.

Some said the Federal Reserve could take a “giant step” by raising the benchmark rate by more than a half percentage point. The two-day interest rate-setting meeting will start on Tuesday (U.S. time).

In Seoul, losses were deep and wide across the board, with hard-hit tech and bio shares dragging down the index.

Market bellwether Samsung Electronics lost 2.66 percent to 62,100 won, and No. 2 chipmaker SK hynix sank 4.35 percent to 99,000 won.

Samsung Biologics fell 3.08 percent to 786,000 won and Celltrion skidded 0.63 percent to 158,500 won.

Carmakers and chemicals also lost ground, particularly as they have experienced output losses and logistics disruptions due to the ongoing strike by truck drivers.

Major battery maker LG Energy Solution shed 2.35 percent to 415,000 won, and chemical giant LG Chem fell 3.60 percent to 562,000 won.

Hyundai Motor sank 5.15 percent to 175,000 won, and its smaller affiliate Kia went down 3.88 percent to 79,200 won.

Internet portal giant Naver dived 5.93 percent to 254,000 won, and platform operator Kakao retreated 4.49 percent to 76,500 won.

The local currency ended at 1,284.0 won against the U.S. dollar, sharply down 15.10 won from the previous session’s close.

Bond prices, which move inversely to yields, closed lower. The yield on three-year Treasurys jumped 23.9 basis points to 3.514 percent, and the return on the benchmark five-year government bond surged 22.7 basis points to 3.679 percent.