Market flat even after growth downgrade

Korean stocks remained almost unchanged yesterday, climbing 0.08 point despite ongoing concerns over the euro zone economies and the government’s announcement yesterday that cut this year’s economic growth forecast to 2.3 percent, lowering than other estimates by the central bank and analysts. Korea’s won weakened against the greenback.

The benchmark Kospi went up slightly to close at 1,993.52 yesterday. Retail and foreign investors unloaded shares while institutional investors’ appetite for Korean shares remained high.

Shares of Samsung Electronics jumped 0.4 percent to close at 1.5 million won while those of food manufacturers and confectionary companies also went up. Shares of Orion jumped 3.13 percent to 1.09 million won. Demand for financial firms in the market was also high among investors yesterday. Shares of Hana Financial Group jumped 1.55 percent to 39,200 won.

Shares of SK Hynix, however, fell 0.68 percent to 29,250 won, and Samsung Electro-Mechanics dropped 0.2 percent to 99,800 won. Stocks of Kia Motors and LG Electronics also fell by each 1.41 percent and 1.21 percent.

Meanwhile, Korea’s three-year bonds rose, sending the yield to a record low. The yield on the 2.75 percent notes due December 2015 dropped 11 basis points, or 0.11 percentage point, to 2.47 percent, according to prices from Korea Exchange. That’s the lowest for a benchmark three-year note in data compiled by Bloomberg going back to 2000.

“The cut in growth projection boosted expectations the Bank of Korea will need to cut rates as soon as April,” said Yoon Yeo-sam, an analyst at Daewoo Securities in Seoul. “Even if it’s not in April, investors are betting the BOK will reduce interest rates at some point to help the economy.”

The won earlier rose as much as 0.3 percent after official data showed the nation’s current-account surplus widened in February. The measure increased to $2.71 billion from $2.33 billion in January, according to the Bank of Korea yesterday.

The currency dropped 0.1 percent to 1,113.15 per dollar at the close in Seoul, according to data compiled by Bloomberg. It dropped 0.6 percent on Wednesday, the most since March 14.

By Lee Eun-joo, Bloomberg [angie@joongang.co.kr]