Stronger Shares Help Give Financials a Large Boost

Helped by rising equity prices, Seoul's financial markets rallied Wednesday, with bond yields falling and the won's value rising.

On the foreign exchange market, the Korean currency ended up 1.3 percent won at 1,302.80 won to the U.S. dollar, after jumping to 1,300 won at the opening bell.

Dealers attributed the won's strength to a stronger Japanese yen and heavy foreign purchases of local stocks, which amounted to 285.5 billion won, the fourth largest this year.

Domestic bond yields fell, as the won's rise helped ease concern about inflation, and redemptions of short-term money market funds showed signs of slowing.

The yield on the benchmark three-year government bonds slid 23 basis points to 6.57 percent, after approaching the 7 percent level late last month. The average yield on three-year corporate debts rated AA-minus sank 18 basis points to 7.87 percent.

Rather than adhering to the inflated book value "an increasing number of investment trust companies are marking their bond portfolios at market prices, reducing their bond selling," said Kim Byeong-chul, a bond trader at Tong Yang Securities Co. "There are also mounting expectations that the inflation rate will not remain over 5 percent," he said, suggesting that bond yields will continue to fall.

by Kim Hyun-chul