Bonds took a beating too, as benchmark yields on three-year corporate bonds rose by 178 basis points to close at 24.68 percent, up from 22.90 percent. For the fourth day this week, the Korean won fell beyond its permissible trading limit, nose-diving to a record low of 1,891.4 per dollar at the market's opening. Thanks to intervention from the central bank, the won closed at 1,710.0, but analysts say it could reach 2,000 against the dollar by next week. The currency has already lost 55 percent of its value against the dollar this year. But many dealers question whether the central bank can prop up the economy, even temporarily.
Brokers say a cloud of distrust hangs over Korea's financial woes.
For that, analysts blame the government. Foreigners wonder if they can trust South Korea, if they can trust its ability to deal with its problems, if the country will play by the rules. The trouble stems from a variety of mixed signals sent by the government. There is a rumor that Kim Young-sam wasn't aware of the full extent of the financial situation until a November 28 phone call from President Clinton, who called to say the nation was a week away from insolvency. Under the terms of the bailout package, South Korea promised the IMF it would clean up its financial mess.