KOSPI and KRW Tumble as South Korea’s Coronavirus Cases Rise, Second to China
Aside from the majors, the South Korean markets have been hard-hit by coronavirus fears at the start of this week’s trading. This comes after confirmed coronavirus cases in the country rose sharply by 161 to 763 while its death toll is at 7. This puts South Korea second only to China in terms of number of people infected by the coronavirus.
The Korea Composite Stock Price Index, otherwise known as KOSPI, is down 3.87% for the day at 2,079.04. This marks its lowest level for 2019. If the sell-off continues, it could fall to 2,053.56 where it bottomed in December 2019. Consumer goods company LG Household Health Care is leading losses at 5.21%. In second and third are Samsung’s insurance arm, Samsung Life, and Shinhan Financial which operates banks in South Korea. Both shares are down by 4.77%.
Following the surge, Korean Airlines and Asiana Airlines have suspended travel to Daegu which is said to have the most number of coronavirus cases. Australia has also advised considering alternative travel to certain provinces in South Korea.
Over the weekend, the South Korean Finance Minister had already warned against the impact of the coronavirus to the economy. It was said that the infection threatened South Korea’s economic recovery and that policymakers were prepared to take “extraordinary measures” to support the economy.
Consequently, the Korean won weakened on these remarks. USDKRW is up by over 1.00% in today’s Asian session as investors take the remarks as a sign of further easing. As of this writing, the currency pair is trading at its previous highs around 1,219.50.If market participants somehow find relief in the coronavirus outbreak, we could see USDKRW recoup some of its losses. According to local Chinese media, the province of Guangdong has lowered its alert level. Non-local residents of Wuhan who are not under quarantine have also been reportedly given permission to leave. China’s National Development and Economic Reform Commission also announced that resumption of work is picking up at a faster pace.
If these positive developments are sustained, investors could feel less jittery about the outbreak. Risk currencies could trade higher. As for USDKRW, it may fall to 1,212.00, fill the weekend gap, and test support at the rising trend line (from connecting the lows of February 19 and February 23).On the other hand, if South Korea’s infections continue to rise and China is not able to confirm improving conditions within its borders, risk aversion would linger. We could then see USDKRW rally to its February 2016 highs at 1,244.30.More content