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U.S. bailout evokes negative Kospi response

Sept 30,2008
Seoul stocks fell yesterday as investors got skittish on doubts over the impact of the U.S. financial bailout plan and a weaker won, analysts said.

The benchmark Kospi fell 19.97 points, or 1.4 percent, to 1,456.36. Volume was thin at 344.2 million shares worth 4.9 trillion won ($4.1 billion), with losers outpacing gainers, 518 to 273.

“The biggest U.S. bailout plan in history to purchase distressed debts failed to enliven investors’ confidence over the local financial market,” said Kim Seung-han, an analyst at CJ Investment and Securities. “Investors will wait and see how the rescue will work on the local economy, where a falling won is aggravating sentiment.”

The local currency finished at 1,188.8 won to the dollar, down 28.3 won from Friday’s close. The passage of the U.S. bailout plan sent the dollar further upward while pushing the won down, dealers said.

Steelmakers and shipbuilders were the biggest drags on the market. Top steelmaker Posco fell 1.8 percent to 454,000 won. Hyundai Heavy Industries, the world’s biggest shipbuilder, lost 3.7 percent and Hanjin Heavy Industries and Construction tumbled 8.3 percent. Banking shares were especially weak, after Credit Suisse Group cut its recommendation on the Korean banking sector to “market weight,” citing a potential deterioration in asset quality stemming from the troubled construction sector and ongoing foreign selling. Woori Finance Holdings, which controls Korea’s second-biggest bank, dropped 4.4 percent. Industrial Bank of Korea declined 4.6 percent.

Most large-cap shares traded sharply lower, with market leader Samsung Electronics falling 1.6 percent to 544,000 won. Home-appliance maker LG Electronics shed 2.3 percent. Hanwha, meanwhile, gained 1.4 percent on a report that state-run Korea Deposit Insurance Corp. plans to sell its 16 percent stake in Korea Life Insurance Co. to Hanwha Group. The possible stake transfer would raise Hanwha’s stake in Korea Life to 67 percent, giving the nation’s conglomerate full control of the insurer. E*Trade Korea, an online brokerage, surged by the daily limit of 15 percent, after the Financial Service Commission approved G&A KBIC, a private equity fund in which LS Networks Co. participates, to become the brokerage’s largest shareholder.

Yonhap, Bloomberg





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