Why Are Seoul Shares Declining Amid US Credit Downgrade?
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Synopsis
Discover the latest on South Korea's stock market as it reacts to Moody's recent downgrade of the U.S. credit rating. Investors show caution, leading to a decline in both the KOSPI index and the local currency. Find out how major companies are impacted and what analysts predict for the future.
Key Takeaways
- KOSPI index fell by 23.45 points, or 0.89%.
- Investor sentiment impacted by Moody's downgrade of U.S. credit rating.
- Institutional and foreign investors net selling.
- Major companies like Samsung and Hyundai saw stock declines.
- Finance ministry monitoring market volatility.
Seoul, May 19 (NationPress) The South Korean stock market experienced a significant drop on Monday, as investor sentiment turned cautious following the recent downgrade of the United States' credit rating by global agency Moody's. The local currency also experienced a decline against the US dollar.
The benchmark Korea Composite Stock Price Index (KOSPI) fell by 23.45 points, or 0.89 percent, finishing at 2,603.42, according to reports from Yonhap news agency.
Trading activity was subdued, with a total volume of 309.7 million shares valued at 6.69 trillion won (approximately US$4.79 billion), and a notable imbalance where losers outnumbered winners at 642 to 240.
The index started the day lower, extending its decline to over 1.2 percent before regaining some of its earlier losses.
Both institutional and foreign investors sold off net amounts of 194.76 billion won and 113.88 billion won worth of stocks, whereas individual investors purchased shares worth 298.67 billion won.
The downgrade of the U.S. sovereign credit rating from Aaa to Aa1, announced on Friday (U.S. time), has raised concerns about the nation's escalating deficit and increasing interest costs, dampening investor confidence.
“This rating downgrade might lead to a market correction, although it is likely to be a short-term issue,” said Han Ji-young, a researcher at Kiwoom Securities.
The South Korean finance ministry has cautioned about increased volatility and has committed to monitoring both financial and foreign exchange markets closely, while maintaining that the downgrade's impact is expected to be limited.
Shares in the technology and automotive sectors contributed to the index's decline.
Market leader Samsung Electronics dropped 1.76 percent to 55,800 won, while rival SK hynix fell 2.49 percent to 199,400 won.
Leading automaker Hyundai Motor saw a decline of 1.44 percent to 191,000 won, and sister company Kia Motors dipped 0.54 percent to 91,500 won.
Defense giant Hanwha Aerospace decreased 0.24 percent to 839,000 won, while top steelmaker POSCO Holdings retreated 0.81 percent to 245,500 won. Major online portal Naver fell 1.28 percent to 185,400 won.
Biotech stocks had mixed results. Leading firm Samsung Biologics increased by 2.59 percent to 1.03 million won, while Celltrion remained stable at 154,000 won.
Additionally, major battery manufacturer LG Energy Solution rose 0.34 percent to 291,500 won, and leading chemical company LG Chem climbed 1.14 percent to 195,800 won.
By 3:30 p.m., the local currency was trading at 1,397.8 won against the US dollar, reflecting a decrease of 8.2 won from the previous session.
Point of View
It is crucial to understand the broader implications of the recent downgrade of the U.S. credit rating. While the immediate market reaction reflects investor caution, it is essential to recognize that this is a temporary setback. Our nation remains resilient, and monitoring these developments will provide insights into future market trends.
NationPress
26/07/2025
Frequently Asked Questions
What caused the decline in South Korean stocks?
The decline was primarily triggered by Moody's downgrade of the U.S. credit rating, which raised concerns about economic stability and investor confidence.
How did major companies perform on the stock market?
Major companies like Samsung Electronics and Hyundai Motor saw significant declines in their stock prices, contributing to the overall drop in the KOSPI index.
What is the KOSPI index?
The KOSPI index is a benchmark stock market index that represents the performance of all common stocks traded on the Korea Exchange.
What are analysts predicting for the future?
Analysts suggest that while the downgrade may lead to a temporary market correction, its long-term impact is expected to be limited.
How is the South Korean finance ministry responding?
The finance ministry has warned about increased market volatility and is closely monitoring financial and foreign exchange markets.
