Seoul stocks dropped another 2.9 percent Thursday on smaller-than-expected stimulus measures from the U.S. Federal Reserve on top of a global growth downgrade by the International Monetary Fund.

The benchmark KOSPI lost 53.73 points to 1,800 after dipping as low as 1,780 at around noon. The junior KOSDAQ fell 1.28 percent to 471.41.

The won weakened further to 1,179.8 against the U.S. dollar, extending its worst week since the collapse of Lehman Brothers in 2008. The won has lost more than 11 percent against the greenback since Sept. 1.

“The market reacted violently to the U.S. Fed’s darkened outlook toward the global economy,” said Kim Hyung-ryul, a strategist in Kyobo Securities.

“The stimulus measures announced weren’t good enough for a lot of investors either, and the downgrading of several U.S. banks didn’t help in reviving business sentiment.”

While exporters fell sharply, domestic shares rose. Medical shares rose 1.02 percent on average and telecommunication shares fell only 0.84 percent.

Concluding a two-day policy meeting, the U.S. Federal Reserve said on Wednesday it will sell short-term treasury bonds worth $400 billion to lubricate the market.

The Fed said that there are “significant downside risks to the economic outlook, including strains in global financial markets.”

The news came only a day after the IMF cut the growth forecast for the global economy by 0.3 percentage points to 4 percent for this year.

The Finance Ministry continued to express concern over the market’s volatility. Finance Minister Bahk Jae-wan, in Washington for an annual meeting of IMF, is said to have advised his Seoul team to tighten the market monitoring.

“It is not desirable to have one-sided betting in the market; we need to tighten monitoring and watch out for speculative moves,” Bahk was quoted as saying by an official. Authorities in the past week intervened to restrain the won’s depreciation.

Financial Services Commission chairman Kim Seok-dong said the potential outflow of foreign capital is the biggest concern for the South Korean economy, because the nation is highly vulnerable to external uncertainties.

“The rapid outflow of foreign capital is the area we are most worried about … Financial institutions may face difficulties in revolving short-term foreign debts, a situation that resembles the 2008 global financial crisis,” the Yonhap news agency quoted Kim as saying in a radio interview.

Kim added that the country’s economy, Asia’s fourth-largest, is receiving “big shocks” from the ongoing global economic slowdown due to its openness.

By Cynthia J. Kim (cynthiak@heraldcorp.com)