KOSPI Falls Below 2,200 on Yuan Jitters

The Korean won took a further beating on Wednesday and bourses tanked as the yuan plummeted against the dollar amid a slowdown in China's economy. 

The won closed down W18.40 against the dollar to close at W1,439.90 on Wednesday after breaching W1,440 at one point in trading, the lowest since March 16, 2009. 

The Korea Composite Stock Price Index closed down 2.45 percent at 2,169.29 points, while the junior Kosdaq fell 3.47 percent to 673.87 points. The last time the KOSPI fell below 2,200 was on July 20, 2020. 

Investor sentiment was hit by reports that Apple will not boost iPhone 14 output in China, which caused the yuan to fall after a downbeat forecast of China's economy growing less than three percent this year. 

That in turn raised concerns about falling Korean exports to China, sending the won into tailspin. China is Korea's top export destination, accounting for a quarter of its outbound shipments. 

Rising fears of slowdowns in the economies of China and Europe have sent the dollar into the stratosphere. The British pound collapsed earlier this week after U.K. Prime Minister Liz Truss announced tax cuts and stimulus measures to boost the economy, and the weakening yuan made matters worse. 

The dollar index, which shows its value compared six major currencies, rose to 114.70 on Wednesday, the highest since April 2002. Most Asian stock markets were down.  

International oil prices are plummeting on concerns of a global recession, and even the price of gold is falling as investors favor the dollar. 

Financial authorities in Korea were busy coming up with an emergency response. The government and Bank of Korea decided to spend W5 trillion to prop up the bond market by buying debt, which gave a little breathing room to sovereign bonds and currency exchanges.

Global ratings firm Fitch further soothed investor sentiment by saying it will maintain Korea's sovereign credit rating at AA- with a stable outlook. But it forecast economic growth will slow to 2.6 percent this year and 1.9 percent in 2023, from 4.1 percent in 2021. 

Fitch is the first among global rating agencies to project growth of less than two percent for Korea next year, saying the sharp slowdown in the global economy will depress Korea's exports and facility investments. "In particular, the semiconductor sector is in the midst of a cyclical downturn, though we expect it to remain a key medium-term growth driver," Fitch said. 

The Ministry of Economy and Finance in an emergency meeting said it will "take measures to ease market volatility" if necessary to calm jitters in the stock and bond markets.