Steel, machines up despite Fitch downgrade

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Steel, machines up despite Fitch downgrade

Seoul stocks closed higher yesterday as steelmaker and machinery gains overshadowed Fitch Ratings’ downgrade of the country’s sovereign rating outlook, analysts said.

The benchmark Kospi climbed 17.97 points, or 1.6 percent, to 1,152.46. Volume was heavy at 686.8 million shares worth 7.1 trillion won ($5.3 billion), with gainers outpacing losers 530 to 292.

“Steel and machinery stocks got a big boost from China’s massive stimulus package,” said Bae Sung-young, an analyst at Hyundai Securities. “Fitch Ratings’ outlook downgrade had a limited impact on the market.”

China said on Sunday it will pledge 4 trillion yuan ($586 billion) to prop up growth. The stimulus package will go toward low-rent housing and roads, railways and airports, and includes tax deductions for purchases of fixed assets such as machinery.

Doosan Infracore, a construction-equipment maker that gets the biggest portion of its sales from China, jumped by the daily limit of 15 percent.

Makers of steel for use in construction also rose. Hyundai Steel and Dongkuk Steel Mill gained by the daily limit of 15 percent each. China’s infrastructure-spending plans are “positive” for the industry, Samsung Securities said in a note. GS Engineering and Construction, the nation’s third-largest builder, advanced 8.1 percent, after it received a 760.9 billion won contract from GS Caltex to build a plant to process heavy oil into petroleum products.

On the other hand, financial shares lost ground, hurt by Fitch’s decision. Woori Finance Holdings fell 4.5 percent and its rival Shinhan Financial Group lost 1.2 percent. Korea Exchange Bank, controlled by U.S. buyout company Lone Star Funds, slid 5 percent. Moody’s Investors Service cut its outlook for the bank’s financial-strength rating to “negative,” from “stable,” on Nov. 7.

Daewoo Securities, a brokerage, lost 3.5 percent. The company said on Nov. 7 that it posted a net loss of 18 billion won ($13.5 million) in the three months ended Sept. 30, compared with a profit in the year-earlier period.

Exceptionally, KB Financial Group, the owner of Kookmin Bank, advanced 5.2 percent. Yonhap, Bloomberg
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