SEOUL: South Korean shares were pounded by waves of selling Tuesday morning, falling as much as 9.9 percent at one point and prompting the bourse operator briefly to suspend programme trading.
Selling pulled down most of the market but banks and brokerages were especially hard hit after massive selling by foreign investors. At 12.23 pm (0323 GMT) the benchmark KOSPI was down 7.89 percent.
"People are throwing stocks away for bonds and cash," said a fund manager with a local asset management firm, adding the market is in panic.
Programme trading on the KOSPI was suspended from 0019 GMT to 0024 GMT in a bid to slow the selling momentum.
The watchdog Financial Supervisory Service said it would strengthen monitoring of the market to detect any rumours or unfair trading, and would guide brokerages, the national pension fund and asset managers to help stabilise the market.
"No individual country can adequately respond to this financial market shock on its own," said Finance Minister Bahk Jae-Wan Bahk. "Given our nature as a small and open economy, we need to strengthen policy collaboration with other countries."
Tuesday's slump camp after the index lost 14 percent over the previous five trading days.
"Investors seem to be overreacting but the sentiment will likely remain negative for the time being," Jeon Jeong-Woo, a fund manager at Samsung Asset Management, told Dow Jones Newswires.
"Monitoring is all the South Korean government can do at the current stage."
Korea's export-dominated economy makes the bourse liable to sharp swings when fresh concerns arise about the health of the global economy, such as eurozone debt fears and Standard & Poor's downgrade of the US credit rating.
Investors cashing out of local bank shares are worried about their dependence on the United States and Europe for over half of their borrowing.
Kim Seok-dong, chairman of the regulatory Financial Services Commission, said banks should diversify their sources of foreign debt borrowing to minimise the impact of global uncertainty.
Copyright AFP (Agence France-Presse), 2011
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