A screen shows the benchmark KOSPI, secondary Kosdaq bourse and the won-dollar exchange rate at a dealing room of Hana Bank in Seoul, Monday. Yonhap
Korean stocks plummeted on Monday as retail investors panicked and engaged in a massive selling spree, driven by prolonged uncertainties surrounding President Yoon Suk Yeol, who faces calls for impeachment.
The Korean currency also weakened sharply against the U.S. dollar, with the won breaching the 1,430 level against the U.S. dollar. It even faces the possibility of breaking the 1,500 level.
The benchmark KOSPI retreated 67.58 points or 2.78 percent from Friday's session to finish at 2,360.58, marking the lowest closing price so far this year.
The index extended a losing streak for the fourth straight session after Yoon's ill-fated bid to impose martial law last Tuesday.
It fell below 2,400 immediately at the start of the trading session, marking the fourth time this year it has dropped below that level.
It fell to as low as 2,360.18 at one point, before ending at 2,360.53.
The crash was a consequence of panic selling by retail investors, who net sold more than 430 billion won ($299.27 million) worth of shares.
The selling spree was largely driven by intensifying political turmoil, after the National Assembly failed in its vote to impeach the embattled president over the weekend.
While Yoon narrowly escaped impeachment, the opposition-led Assembly plans to vote on it every coming weekend until it succeeds.
The plans add to the bleak outlook for the economy and financial markets, as the martial law has created a power vacuum in Yoon's governing camp and left important policies on hold.
The panic selling was also seen in the secondary Kosdaq, which dropped at a steeper pace than the KOSPI.
The index consists of small- and mid-cap stocks that are more susceptible to negative investor sentiment.
Correspondingly, it lost 34.32 points or 5.19 percent from Friday's session to finish at 627.01.
It was the lowest closing prince in more than four and a half years.
The Korean currency surged by 17.8 won to close at 1,437 won, marking its weakest level in more than two years.
It started at 1,426 won in onshore trading on Monday, rising by 6.8 won from the previous session. The currency continued to weaken, reaching 1,433 won just before noon.
Experts expressed concerns that both the stock and foreign exchange markets may remain unstable due to the political unrest, as the ruling People Power Party (PPP) is in a standoff with the opposition bloc by boycotting the impeachment vote.
“It is possible that the KOSPI will set a new yearly low every Monday, depending on the outcome of the impeachment vote planned by the Assembly each weekend,” said Jung Eui-jung, head of the Korean Stockholders' Alliance.
Kim Ji-won, a researcher at KB Securities, voiced a similar view, saying, “The failed impeachment vote is extending political uncertainties and the financial markets should be prepared for heightened volatility in the short term.”
Asking not to be named, a foreign exchange analyst said the Korean currency is anticipated to lose ground and that the won could depreciate beyond the 1,500 level against the dollar.
“The currency rate has been going up before the impeachment-related issues, and Yoon literally poured oil on the flames,” he said.
He cited foreign investors' exit from the Seoul financial markets and the looming second Donald Trump presidency, which has contributed to the weakening of the won.
To minimize economic risks, Deputy Prime Minister and Minister of Economy and Finance Choi Sang-mok reaffirmed, Monday, the government's plan to supply what he described as "unlimited liquidity" until the "complete normalization" of the domestic markets for stocks, bonds, as well as short-term and foreign currency funds.
He made the announcement during a meeting on macroeconomic and financial issues, attended by Bank of Korea Governor Rhee Chang-yong, Financial Services Commission Chairman Kim Byoung-hwan, and Financial Supervisory Service Governor Lee Bok-hyun.