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Stocks dive as U.S. rescue plan deadlocked

Sept 27,2008
Seoul stocks tumbled yesterday as investors dumped tech, finance and other large-cap shares on renewed concerns that a much-awaited U.S. bailout plan for its ailing financial system could be delayed due to prolonged political wrangling, analysts said.

The benchmark Kospi fell 25.3 points, or 1.7 percent, to 1,476.33. Volume was heavy at 495.7 million shares worth 4.3 trillion won ($3.7 billion), with losers outpacing gainers 537 to 258.

“Despite overnight rallies in the U.S., investors were disappointed with news of a possible delay in the Washington-led $700 billion bailout package, on which many have pinned hopes of the financial system becoming stable,” said Choi Soon-ho, an analyst at Eugene Investment and Securities.

News of a near agreement on the Bush administration’s bailout plan drove overnight rallies on Wall Street. But investor optimism was dashed hours later as lawmakers reportedly failed to iron out differences over what government officials see as crucial to avoid an economic recession.

Financial shares were especially weak. Shinhan Financial Group fell 2.1 percent, while Woori Finance Holdings plunged 7.5 percent. Hana Financial Group retreated 4.5 percent.

“Growing calls that banks should aid clients who face losses from currency derivatives sold by the lenders are serving as a drag,’’ said Lee Young-seog, a fund manager at Korea Investment Trust Management.

Tech exporters were also among the largest contributors to the downswing. Market heavyweight Samsung Electronics sank 2.5 percent to 553,000 won. Goodmorning Shinhan Securities reduced its share-price estimate by 9.3 percent. LG Electronics lost 2.7 percent and its affiliate LG Display also dropped 2.3 percent.

Lotte Confectionery, Korea’s biggest maker of candy and cookies, declined 4 percent. Haitai Confectionery, whose snacks imported from China were found to be tainted with melamine, is not listed.

“The uncertainty surrounding the melamine scandal seems to be scaring away investors, and food makers tend to get a big hit on their image once safety issues on their products are raised,’’ said Jeong Seong-hoon, an analyst at Hyundai Securities.

Yonhap, Bloomberg



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