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South Korea becomes world’s worst major equity market in 2019 to date

[SINGAPORE] South Korean equities overtook those of Malaysia on Tuesday to become the world's worst major equity market for the year as ongoing trade war with Japan and tensions between the US and China slashed the nation's earnings outlook.

The benchmark Kospi Index has dropped 6.1 per cent year to date compared with 5.1 per cent decline in the FTSE Bursa Malaysia KLCI Index as of 9.58am in Singapore. China's yuan sinking beyond seven per dollar on Monday for the first time in more than a decade fuelled fresh offloading of equities in South Korea, whose economy relies heavily on export.

Analysts have responded by cutting their earnings-per-share estimates for the next 12 months by 23 per cent since the beginning of the year. The Kospi Index was volatile on Wednesday as futures on the S&P 500 Index fell as much as 0.6 per cent as at 10.25am in Singapore after the Chinese central bank's daily yuan fixing was seen as slightly weaker than expected.

Technical indicators have started pointing to potential relief ahead. A pair of technical studies, DeMark's Combo indicator and relative strength index, may be signalling the rout in South Korean stocks is nearing a turning point, so long as traders are willing to try and catch a falling knife.

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