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Shipbuilder problems infect wider market

Aug 06,2008
Seoul stocks finished lower yesterday after up-and-down trading as foreign selling of steel and machinery shares weighed down earlier gains from institutional buying, analysts said.

The benchmark Kospi closed down 7.51 points, or 0.5 percent, at 1,535.54. Volume was thin at 234.3 million shares worth 4.8 trillion won ($4.7 billion) with losers outpacing gainers 478 to 332.

“The recent concerns over shipbuilders seems to have spilled over to steelmakers, causing worries that possible cancellations of shipyard orders could also pull back steel plate demand,” Lim Dong-min, an analyst at Dongbu Securities, said.

Shares of Korean shipyards plunged Monday on fears of future order cancellations after Daewoo Shipbuilding and Marine Engineering, the world’s third-largest shipyard, disclosed Friday that it had revoked a $608 million order to build eight container ships after the client failed to pay a deposit in advance.

Steelmakers were rattled hard, with industry leader Posco sliding 4.9 percent and smaller rival Hyundai Steel plummeting 6.3 percent.

Dongkuk Steel Mill, Korea’s third-largest steel maker, fell the most in more than seven months, leading losses in competitors. It tumbled 10.6 percent.

Shipyards also extended their losses. Hyundai Heavy Industries, the world’s biggest, slipped 3.5 percent. Samsung Heavy Industries, the second-largest, dropped 5.5 percent. Daewoo Shipbuilding lost 3 percent.

Shipyards’ third-quarter earnings growth may slow further as plate costs rise, while further slowdown in the global economy may dampen order flow and lead to more order cancellations, Goodmorning Shinhan Securities wrote in a report.

Top wireless carrier SK Telecom advanced 2.9 percent. Industry competition will ease in the second half after KTF posted a second-quarter loss, Hanwha Securities wrote in a report. Samsung Electronics inched up 0.4 percent to 567,000 won, but most other tech exporters lost ground. LG Display lost 3.9 percent. The company’s business outlook has “deteriorated further’’ as its customers are losing market share to Samsung Electronics and Sony, BNP Paribas wrote in a report.

Yonhap, Bloomberg


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