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S. Korean shares fall on lingering European woes

11-07-2011 16:17 BJT

SEOUL, Nov. 7 (Xinhua) -- South Korean shares closed 0.48 percent lower on Monday as investors took to the sidelines amid lingering concerns over Europe's debt crisis, a analyst said here on Monday.

The benchmark Korea Composite Stock Price Index (KOSPI) fell 9. 31 points, or 0.48 percent, to close at 1,919.10. Trading volume stood at 342.96 million shares worth 5.07 trillion won (4.54 billion U.S. dollars).

The KOSPI started 0.24 percent higher, but turned to negative terrain on concern that the European fiscal crisis may spread to Italy. Italy's borrowing costs shot up to the record high last week since the 17-nation shared currency was introduced. The yield on the Italian 10-year government bond soared to around 6.4 percent last Friday, boosting concerns that the euro-region's third largest economy may face fiscal crisis.

Worries about Greece eased more or less on the nation's plan to create a new unity government. Greek Prime Minister George Papandreou agreed to step down, and the country's lawmakers would form a new government to secure bailout funds and shun the possible collapse of its economy.

"Concerns over the euro-area's debt crisis still remain. Investors do not give great confidence on the Greek plan to avert a crisis, and the Italian bond yield to surged to the record high level of 6.4 percent,"Jeong Seung-jae, an analyst at Mirae Asset Securities in Seoul, told Xinhua.

Jeong, however, noted that Italy would unlikely slip into default as the euro-region's third largest economy would survive on the too-big-to-fail logic as seen in the Citi and the Bank of America (BOA) during the 2008 global financial crisis.

The analyst forecast that China's monetary policy would become less tightened after the announcement of consumer price index (CPI) this week as easing inflationary pressures of the world's No. 2 economy would be reflected in the data, saying it could help the KOSPI test the resistance level of 1,960 points, or its 120-day moving average.

Program-linked selling led the market decline. Program transactions posted a net selling worth 325.6 billion won, while local institutions sold a net 6 billion won worth of stocks.

Foreign and retail investors, however, were net buyers, shoring up stocks. Overseas investors purchased a net 140.5 billion won worth of local shares, with retail investors buying a net 92.3 billion won worth of stocks.

Large-cap shares lost ground across the board. Market bellwether Samsung Electronics fell 1.19 percent to close at 993, 000 won, and top automaker Hyundai Motor edged down 0.42 percent to 237,000 won. The nation's biggest auto parts maker Hyundai Mobis dropped 2.56 percent to 324,000 won, and top steelmaker POSCO inched down 0.13 percent to 378,500 won.

The nation's No. 1 crude oil refiner SK Innovation fell 1.15 percent to 172,500 won, and leading chemical firm LG Chem dipped 1. 61 percent to 366,500 won. The world's largest shipbuilder Hyundai Heavy Industries were down 0.69 percent to 286,500 won.

In contrast, LG Electronics jumped 1.8 percent to 62,200 won, ending its losing streak last week caused by the company's announcement that it would raise 1.06 trillion won through a rights offering. The global credit rater Standard & Poor's said last week that LG's credit rating would not be affected by its plan to sell new shares.

The local currency finished at 1,116.9 won against the greenback, down 6.2 won from Friday's close.

Bond prices ended higher. The yield on the liquid three-year treasury notes slid 0.02 percentage point to 3.41 percent, and the return on the benchmark five-year government bonds lost 0.01 percentage point to 3.54 percent.

Editor:Zhang Hao |Source: Xinhua

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