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By Park Hyong-ki
Local stocks further sank Thursday driven by foreign sell-offs of blue chips amid growing concerns over the rapid pace of U.S. interest rate hikes, and global trade conflicts.
The KOSPI plunged below the 2,200 mark, closing down 4.4 percent at 2,129.67, the lowest since April 12. The tech-heavy KOSDAQ finished at 707.38, down 5.4 percent.
The key stock index has been sliding for eight straight trading days as foreign investors unloaded stocks worth 2 trillion won ($1.8 billion), according to the Korea Exchange (KRX). Foreign stock investments account for nearly 40 percent of the KOSPI's market capitalization.
The fall of the local stocks amid foreign net sales of 600 billion won follow an overnight steep decline on Wall Street where the Dow Jones Industrial Average and the S&P 500 recorded their biggest single-day losses.
The Dow fell to 25,598.74 Wednesday, down 3.15 percent, while the S&P 500 dropped 3.29 percent to 2,785.68 on heavy tech share sell-offs.
"Investors seemed concerned over the pace of U.S. rate hikes, even though the U.S. economy and inflation are showing positive signs of growth," said Noh Dong-kil, an analyst at Shinhan Investment.
A rise in interest rates of 10-year treasuries on the back of the strong dollar tends to make stocks less attractive, the analyst added.
The yield on the long-term state bonds hit 3.23 percent as of Oct. 5, the highest since May 2011, according to Shinhan Investment.
The fast rise amid the Federal Reserve's key rate hikes is raising concerns over increasing borrowing costs, which could slow the world's largest economy.
U.S. President Donald Trump criticized the Fed again via Fox News, saying he was "not happy" with what the central bank was doing with its monetary policy, and that raising the rate was "ridiculous."
He added he blamed the Fed for the recent stock decline, saying the central bank was "going loco."
Analysts say there were other external factors affecting foreign investors' sentiment and confidence.
"The ongoing trade dispute between the U.S. and China and concerns over Italy's economy are undermining market sentiment," said Kim Young-hwan, an analyst at KB Securities.
Italy is facing a sovereign debt crisis on a similar scale to that of Greece in the aftermath of the 2008 global financial shock.
The yield on 10-year Italy bonds reached 3.6 percent, the highest in five years, as the country announced higher spending plans despite growing debt and opposition from the European Union. This is in contrast to the U.S. economy where its market interest rate is rising on the back of strong growth.
Nearly 300 local stocks on the benchmark KOSPI hit record 52-week lows, according to the KRX.
Samsung Electronics, the biggest blue chip, closed down 4.9 percent at 43,100 won. Foreign investors hold 53 percent of Samsung shares.
SK hynix, the world's second-biggest memory chip maker, lost 1.9 percent to close at 69,000 won.
