China’s Plans to Cool Economy Cause Jitters

By Cho Hyung-kwon
Staff Reporter

The domestic financial market was rocked hard on Thursday as comments from Chinese Premier Wen Jiabao suggesting powerful measures to cool the Chinese economy caused jitters among investors.

In an exclusive interview with Reuters Wednesday, Wen said that ``China was committed to forceful measures to cool its dangerously fast-growing economy,’’ and it could face ``resurgent inflation due to unchecked expansion in money supply and bank credit.’’

The local stock market suffered its biggest decline in more than five months and the benchmark stock index tumbled to its lowest level in a month.

Massive foreign equity selling also triggered the Korean won to weaken against the U.S. dollar to the lowest level in almost a month and a half.

The Korea Composite Stock Price Index (KOSPI) plummeted 26.42 points, or 2.92 percent, to close at 875.41, the lowest since reaching 873.46 on March 30. The 2.92 percent tumble was the largest fall since a 3.65 percent plunge on Nov. 19, 2003.

Meanwhile, the technology-heavy Kosdaq also slumped 22.66 points, or 4.73 percent, to 456.04. The Kosdaq suffered its worst decline in percentage terms since a 4.83 percent nosedive on Sept. 22, 2003.

The won-dollar exchange rate shot up more than 15 won to 1,171.5 against the greenback as foreign investors made their biggest net equity selling ever. The won-dollar rate broke past the 1,170 won level for the first time since March 16.

Overseas investors dumped more than 774 billion won of shares, more than double the previous high of 376 billion won recorded on Aug. 6, 2002.

Samsung Electronics lost more than 4 percent to 576,000 won and Kookmin Bank, POSCO, Hyundai Motor and Hana Bank also closed in negative territory.

Declining issues outnumbered advancers by a margin of more than three to one on trading of 437 million shares.

kevincho@koreatimes.co.kr