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S.Korean shares drop on European woes

09-14-2011 16:23 BJT

SEOUL, Sept. 14 (Xinhua) -- South Korean shares ended 3.52 percent lower on Wednesday as offshore investors dumped local shares on lingering concerns over the European debt woes, analysts said.

The benchmark Korea Composite Stock Price Index (KOSPI) dropped 63.77 points, or 3.52 percent, to close at 1,749.16. Trading volume stood at 335.04 million shares worth 5.78 trillion won. Local stocks were closed for Chuseok holiday on Monday and Tuesday.

The KOSPI started 0.49 percent lower and extended its earlier losses throughout the session on lingering concerns that Greece may fall into default.

"In actual terms, Greece should be regarded as being in default. Even though there are consensus formed that Greece would be bailed out, other eurozone nations such as Italy and Spain will face huge amounts of maturities in their government bonds in the foreseeable future," Lee Kyung-soo, an analyst at Shinyoung Securities in Seoul, told Xinhua.

After the Financial Times reported that Italy aimed to sell its government bonds to China, the contagion risk of the European fiscal crisis were eased, but Chinese Premier Wen Jiabao's remarks lowered such hopes.

Premier Wen said at the opening of the World Economic Forum that China was willing to help debt-laden Europe by increasing its investment, but noted that countries must first put their houses in order. His remarks were recognized as a signal that developed countries must cut fiscal deficits rather than depending on China's bailout.

"Europe's debt problems should be solved from outside the region by receiving bailout funds from emerging economies such as China, but speculation that China would not increase its European bond purchases disappointed investors, which triggered foreign net selling," said Lee.

Foreigners led the market decline by offloading a net 668.8 billion won worth of local shares. They have sold a total of 1.96 trillion won worth of domestic stocks for the past seven sessions.

Institutional investors were net sellers early in the trading, but ended up net buyers worth 78.1 billion won helped by aggressive buying of national pension funds. Retail investors were also net buyers by purchasing a net 456.1 billion won worth of stocks.

Bank and financial shares fell sharply on news that the global credit rating appraiser Moody's downgraded the credit ratings of France's second- and third-largest banks by assets. Moody's cut the rating of Societe Generale to Aa3 from Aa2 with a negative outlook, while lowering the rating of Credit Agricole to Aa2 from Aa1 because of their exposure to Greece.

The country's largest banking group by assets Woori Finance Holdings plunged 8.76 percent to end at 9,170 won, and its rivals KB financial Group and Hana Financial Group tumbling 7.22 percent and 3.76 percent respectively. Leading local brokerage Daewoo Securities sank 6.73 percent to 10,400 won, and Woori Investment & Securities dropped by 6.7 percent.

Tech, auto and chemical shares lost ground on foreign selling. Market bellwether Samsung Electronics slipped 3.46 percent to 753, 000 won, and top auto-maker Hyundai Motor lost 3.29 percent to 191, 000 won. Leading chemical firm LG Chem dived 6.65 percent to 323, 000 won, and the nation's largest crude oil refiner SK Innovation dipped 4.32 percent to 155,000 won.

The local currency finished at 1,107.8 won against the greenback, down 30.5 won from Friday's close.

Bond prices ended higher. The yield on the liquid three-year treasury notes dropped 0.05 percentage point to 3.31 percent, and the return on the benchmark five-year government bonds slid 0.05 percentage point to 3.40 percent. (One U.S. dollar equals 1100.95 won.)

 

Editor:Zhang Rui |Source: Xinhua

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