Bearish Mood Dominant; Mart May Dive Under 600

Will Seoul's main stock market be able to remain above the 600-point mark? After touching the 630-point level last Tuesday, the market started to decline, confronted with some bearish factors.

One unfavorable factor was the U.S. Nasdaq market's decline. Foreign investors on the Seoul market have become cautious after the Nasdaq composite index dropped below the critical 2,200 point-level last Tuesday. Foreigners unloaded 130 billion won ($101.2 million) of shares in total last week.

Another was disappointing business indicators. The U.S. government reported last week that industrial output growth slowed in April and investment in equipment contracted for a sixth month. The U.S. National Association of Purchasing Management reported last week a decline in its index of industrial activity for May from a month earlier.

At the end of May, U.S. firms began reporting their second-quarter earnings, many of which are expected to be lower than Wall Street's projections. Sun Microsystems warned that its earnings would fall below industry analysts' estimates.

The concern about liquidity in the Seoul stock market is also a bearish factor. Customers' deposits exceeded 9.5 trillion won at one point, buoying hopes for a buying spree by retail investors. But the hopes did not materialize, and the deposits fell to 8.84 trillion won on Friday. Retail investors took their cash from sales of shares to foreign investors out of the stock market rather than reinvesting.

Institutional investors, who had begun to buy after a long bearish mood, showed the limits of their optimism last week. So the Seoul market is just waiting for the resumption of net purchases by foreign investors, without any other breakthrough. The National Pension Corp. plans to put 600 billion won into the stock market this month. But the investment will take place after the middle of the month, since it takes time to designate investment trust management firms to place the funds.

Both options and futures contracts will expire on Thursday, so this week will be a tough period for the stock market. Analysts said that only some good news, such as the sale of Daewoo Motor Co., would help keep the Korea Composite Stock Price Index above 600 points.

by Kim Kwang-ki