The global bogeymen of deleveraging and frozen credit markets are more fearsome in South Korea than most of Asia. The private sector is heavily indebted and the country's banks depend on overseas wholesale markets for some 12 per cent of their funding. The current account, having moved back into deficit for the first time since the Asian financial crisis of 1997-98, is another red flag for investors. Since the start of the year foreigners have sold a net $24bn of Korean shares, helping drive the won down by a third against the dollar. Like other emerging market economies with current account deficits and short-term external debt, Korea will have difficulty rolling over its borrowings.

Where does it end? The good news is that Korea has more firepower with which to defend the won than it had in 1997: foreign exchange reserves stand at $240bn, about 11 times the last pre-crisis levels. Seoul tends to react quickly when push comes to shove, as witnessed during the last crisis (although it is equally quick to retreat when things seem better).

Against that, foreign exchange reserves are gradually being whittled back through intervention to stem the won's slide. Domestic money markets are also tightening, showing the crisis is on home turf as well as overseas. The global economic slowdown immediately impinges on Korea as a major exporter. The country has long been labelled “a hedge fund on the global economy”. It is a long time since that description looked so apposite – or so unfortunate.