Market down despite stable U.S. rating

Korean shares fell 0.62 percent yesterday as foreign investors dumped local stocks, despite Standard & Poor’s revising the credit rating outlook for the United States to stable from negative. Concerns continued to grow among investors over the possibility of the U.S. withdrawing from its fiscal stimulus plan. Finance Minister Hyun Oh-seok said the Federal Reserve’s possible exit from monetary stimulus adds to the uncertainties facing the Korean economy.

The benchmark Kospi dropped 12.02 points to close at 1,920.68 yesterday at the Seoul bourse. While retail and institutional investors net purchased local shares, foreign investors net sold investments.

Shares of Samsung Electronics, the country’s largest cap share, dropped 2.53 percent to 1.39 million won ($1,225) yesterday. It was the fourth consecutive trading day that shares of Samsung fell after its price target was cut at Morgan Stanley yesterday, following JP Morgan last Friday.

While shares of Hyundai Motor jumped 0.24 percent to 206,500 won, shares of Posco dropped 0.16 percent to 316,000 won and Hyundai Mobis fell by 0.93 percent to 265,000 won.

Meanwhile, the won fell to a two-month low on speculation that global investors selling Korean equities will repatriate proceeds. Government bonds rose.

“Foreign investors have sold Korean shares and they may repatriate their proceeds,” said Jeon Seung-ji, an analyst at Samsung Futures in Seoul. “The dollar rose after S&P boosted the U.S. rating.”

The won fell 0.6 percent to 1,134 per dollar in Seoul, according to data compiled by Bloomberg. It touched 1,137.75, the weakest level since April 10. One-month implied volatility, a measure of expected moves in the exchange rate used to price options, rose 62 basis points, or 0.62 percentage point, to 10.73 percent. Foreign funds sold $1 billion more Korean shares than they bought this month through June 10, exchange data shows. Korea will continue policy efforts to support growth in the second half of the year as the country’s economic outlook remains uncertain amid stimulus measures undertaken by major economies, including Japan, Finance Minister Hyun said before a meeting with economists in Seoul yesterday.

BY LEE EUN-JOO, BLOOMBERG [angie@joongang.co.kr]