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S. Korean shares fall ahead of "quadruple witching day"

03-05-2012 15:46 BJT

SEOUL, March 5 (Xinhua) -- South Korean shares fell for the first time in four sessions on Monday as investors sold stocks through program-linked transactions ahead of the so-called " quadruple witching day" when futures and options related to individual stocks and stock indices expire, analysts said.

The benchmark Korea Composite Stock Price Index (KOSPI) fell 18. 57 points, or 0.91 percent, to close at 2,016.06. Trading volume stood at 542.27 million shares worth 5.06 trillion won (4.52 billion U.S. dollars).

The KOSPI took a weak start, and extended its earlier losses throughout the session as investors took to the sidelines ahead of the simultaneous expiry of futures and options slated for Thursday.

"Following the fall in market basis during the trading, arbitrage selling came out in the market through program transactions. It remains to be seen whether such selling would continue till the quadruple witching day, but today's selling reduced burdens for the expiration date," Lee Joong-ho, a derivatives analyst at Dongyang Securities in Seoul, told Xinhua.

Investors tend to liquidate their long arbitrage position after the market basis, or the difference between futures and spots, retreats, leading to an increase in selling spots together with buying futures. Lee forecast that the liquidation was not expected to be large at the expiration date as the spread between March and June futures remains at a high level, saying that the high spread usually results in the rollover of the long arbitrage positions.

Program-linked selling led the market decline, with net selling amounting to 247.1 billion won. Among the figure, 174 billion won worth of stocks were sold through arbitrage transaction, with the remaining stocks sold via non-arbitrage trading.

Foreign investors were net sellers both on spots and futures. Foreigners sold a net 58.6 billion won worth of local shares, with net sales for futures reaching 4,449 contracts. Local institutions offloaded a net 147.3 billion won worth of stocks, but retail investors limited further decline by purchasing a net 271.4 billion won worth of shares.

Cyclical stocks ended bearish after China lowered its economic growth target for 2012. China set its GDP growth target at 7.5 percent this year, down from 8 percent in 2011.

Chemical shares sensitive to economic conditions lost ground. Leading chemical firm LG Chem dropped 4.83 percent to 384,500 won, and its rival Honam Petrochemical retreated 4.74 percent to 342, 000 won. The nation's No. 3 oil refiner S-Oil lost 0.4 percent to 125,000 won.

Tech shares also ended down. Market bellwether Samsung Electronics fell for two straight sessions to close at 1,174,000 won, down 0.68 percent against Friday's close. Memory chip giant Hynix Semiconductor fell 1.31 percent to 30,050 won.

Construction shares ended bearish. Top builder Hyundai Engineering & Construction declined 1.06 percent to 84,200 won, and its smaller rival Daewoo Engineering & Construction retreated 2.35 percent to 10,400 won.

In contrast, air carriers ended bullish on eased upward pressures on global oil prices. Top air carrier Korean Air rose 0. 95 percent to 53,000 won, and its rival Asiana Airlines gained 0. 95 percent to 7,450 won. Logistics firm Hyundai Glovis added 1.1 percent to 184,500 won, and shipping firm Hanjin Shiping rose 1.64 percent to 18,600 won.

The local currency finished at 1,118.5 won against the greenback, down 3.0 won from Friday's close.

Bond prices ended lower. The yield on the liquid three-year treasury notes climbed 0.03 percentage point to 3.51 percent, and the return on the benchmark five-year government bonds gained 0.03 percentage point to 3.61 percent.


Editor:Zhang Rui |Source: Xinhua

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