S.Korea Stock Market Plunges
SEOUL, South Korea (AP) _ Stock prices in South Korea on Tuesday tumbled to their lowest level of the year, with the key index slipping briefly below 350 points for the first time in 11 years before rebounding slightly.
Investors were unsettled by reports the U.S. ratings agency, Moody’s Investors Service, downgraded further debt ratings of South Korean banks and that more financially weak companies would fold in a few months.
The Korean Composite Stock Price Index plunged below 350 points in the morning session for the first time since 1987. The benchmark index later recovered, closing at 351.86 points, down 2.69 percent from Monday.
South Korea’s stock market has been pummeled by the financial crisis sweeping through Asian nations since last summer. South Korea was forced to turn to the International Monetary Fund for a $57 billion bailout of its economy in December.
``There is not much reason for investors to buy stocks now. They will wait and see which companies would survive through the next couple of months,″ said Baek Man-in, an analyst at Dongbang Peregrine Securities Co.
President Kim Dae-jung prompted the scare by saying Sunday that the government will decide by the end of May or June which of the financially shaky banks and companies should be shuttered.
Following Kim’s remarks, South Korea’s major commercial banks announced plans Monday to review local companies and stop extending loans to those deemed not viable. Local media reported that about 10 of the nation’s top 30 conglomerates were already put on a watch list.
In other news, Moody’s Investors Service cut the credit ratings of 18 local banks, citing their support for financially ailing companies.
Also today, the Keopyung group, the nation’s 28th largest conglomerate, announced bankruptcy, the ninth South Korean conglomerate to collapse under billions of dollars in bad loans in the past year.
South Korean conglomerates are largely blamed for aggravating the nation’s financial woes with their reckless expansion through heavy borrowing.