Political jitters push Kospi even lower

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Political jitters push Kospi even lower

Korean shares fell 0.44 percent yesterday amid heightening tension on the Korean Peninsula that led foreign investors to sell off their stocks.

The benchmark Kospi went down 8.54 points to close at 1,918.69 yesterday, the sixth day the index fell. While retail and institutional investors’ appetite for Korean shares was high, foreign investors sold their stocks.

The minor Kosdaq also fell 3.42 percent to close at 528.78. The Bank of New York Mellon Korea ADR index, which measures the American depositary receipts of Korean companies, sank 2.6 percent, the most since June 21, to 171.80 on Friday.

“Tensions with North Korea are intensifying, making investors nervous about the situation on the Korean Peninsula and prompting sales of South Korean assets,” said Jeon Seung-ji, an analyst at Samsung Futures in Seoul. “Authorities may try to take action if they find market reactions are excessive, while investors will also eye the yen-won movement.”

Shares of Samsung Electronics jumped 1 percent to close at 1.52 million yesterday compared to the previous closing on Friday while shares of Hyundai Mobis went up 1.74 percent to close at 5,000 won ($4.38).

Shares of Posco, however, dropped 0.32 percent to close at 311,500 won while those of Kia Motors also went down 0.2 percent to 50,700 won. Stocks of SK Hynix dropped 2.28 percent to 27,900 won while those of Korea Electric Power Corporation plunged 3.41 percent to 29,700 won.

The won slid 0.8 percent to close at 1,140.15 per dollar in Seoul after touching 1,140.36, the lowest level since July 27, according to data compiled by Bloomberg.

The Kospi index slumped 3.9 percent last week, the biggest drop since May, and the won slid 1.8 percent as North Korea passed a law authorizing “counter-actions” against U.S. aggression, including a nuclear strike.

One-month implied volatility in the won, a measure of expected moves in the exchange rate used to price options, jumped 117 basis points, or 1.17 percentage point, to 10.29 percent. The yield on the 2.75 percent government notes due March 2018 climbed two basis points to 2.56 percent, according to prices from Korea Exchange.

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