The South Korean stock market has finished lower now in back-to-back sessions after the five-day winning streak in which it collected more than 80 points or 7 percent. The KOSPI slid below support at 1,200 points, and now investors are anticipating even further declines at the opening trade on Tuesday.
The global forecast for the Asian markets is broadly negative, with continued pressure likely among the automobile stocks and the financial issues. The European and U.S. markets finished sharply lower on Monday and the Asian bourses are tipped to follow that lead - although the losses may not be quite as heavy, since the Asian markets already suffered sizeable losses in Monday's trade.
The KOSPI finished sharply lower on Monday, on continued profit taking from last week's winning streak. The financial stocks were hit especially hard, as were the automobile producers.
For the day, the index shed 40.05 points or 3.24 percent to close at 1,197.46 after trading between 1,196.32 and 1,244.78. Volume was 520 million shares worth 4.8 trillion won. There were 675 decliners and 162 gainers, with 44 stocks finishing unchanged.
Among the decliners, KB Financial Group was down 6.63 percent, while Shinhan Financial fell 8.99 percent, Woori Finance shed 2.64 percent, Hyundai Motor lost 3.81 percent, Kia Motor dropped 5.18 percent, Ssangyang Motor fell 10.45 percent, Hyundai Heavy Industries lost 5.71 percent, Daewoo Shipbuilding fell 4.15 percent, Samsung Heavy Industries dropped 5.91 percent, Samsung Electronics declined 2.91 percent, S-Oil fell 3.54 percent, SK Holdings lost 4.91 percent, LG Electronics fell 2.55 percent and LG Display lost 4.20 percent.
Wall Street offers another sharply pessimistic lead as stocks saw continued weakness throughout the trading day on Monday after moving sharply lower in early trading. While the major averages did not see much follow-through on their early downward move, they remained stuck firmly in negative territory. The weakness in the markets came as investors responded to disappointing news regarding the auto industry as well as renewed concerns about the outlook for the financial sector. Some traders also looked to cash in on the gains seen in the three previous weeks.
Much of the selling pressure came as President Obama and his auto task force indicated that General Motors (GM) and Chrysler have not gone far enough in their restructuring plans and need to step up their efforts to reorganize in order to receive additional government aid. While the administration will continue to provide operating funds for the next few weeks, it has given both GM and Chrysler a final deadline, threatening bankruptcy if the beleaguered auto giants do not significantly increase their efforts to restructure their business.
Additionally, at the request of the White House, Rick Wagoner has stepped down as chairman and CEO of General Motors, with Fritz Henderson, GM president and chief operating officer, set to replace Wagoner as CEO.
Financial stocks also experienced considerable weakness after Treasury Secretary Geithner suggested that more banks might need bailout funds. Appearing on the Sunday talk shows, Geithner explained that the ongoing stress tests for the financial industry have shown many other banks need funds from the TARP, although he said there is only about $135 billion left in the bailout pool.
Meanwhile, optimism surrounding this week's G20 summit has waned, as investors fear that earlier hopes that the countries will agree to a coordinated fiscal boost appear to have been crushed by skepticism in many European governments.
The major averages regained some ground going into the close of trading, but they remained firmly negative. The Dow closed down 254.16 points or 3.3 percent at 7,522.02, the Nasdaq closed down 43.40 points or 2.8 percent at 1,501.80 and the S&P 500 closed down 28.41 points or 3.5 percent at 787.53.
In economic news, South Korea will on Tuesday provide February numbers for industrial output, leading index and service industry output. Industrial output is expected to retreat 16.6 percent on year after the 25.6 percent fall in January. The leading index was down 4.5 percent in the previous month, while service industry output is expected to fall an annual 2 percent.
Also, South Korea's current account balance in February shifted to a surplus of 3.68 billion dollars, the Bank of Korea said on Monday, following the 1.64 billion dollars deficit in January. The goods account shifted from the previous month's $1.74 billion deficit to a surplus of $3.15 billion as despite a year on year fall in both exports and imports, imports decreased at a faster rate than exports. The services account deficit narrowed to $0.49 billion from $0.71 billion a month earlier, as the travel account surplus widened greatly, offsetting increased payments of royalties and license fees.
Finally, officials in the Ministry of Strategy and Finance revealed that the national debt in the country is expected to increase to as much as 19 percent this year, as the government is planning to issue bonds to fund the extra-budget amount. The total national debt, which was at 308.3 trillion won last year, is projected to increase to 366.9 trillion won during the current year, the officials noted.
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