Jitters about the North depress market

Korean shares plunged more than 1 percent yesterday to below the 2,000 point mark amid growing uncertainty on the Korean Peninsula following reports on Tuesday that Jang Song-thaek, the uncle of North Korean leader Kim Jong-un, appears to have been dismissed from all his posts. Shares also dropped as there is a growing sentiment among investors that the U.S. Fed might start tapering its stimulus program soon with the U.S. economy showing signs of recovery.

The benchmark Kospi dropped 1.12 percent or 22.56 points to close at 1,986.8 yesterday, falling below the 2,000 mark after remaining above for eight days. While retail investors and institutional investors were large buyers, foreign investors off-loaded more than 400 billion won ($376.9 million) worth of their shares, reflecting how they are responding sensitively to North Korea issues.

Shares of Samsung Electronics went down 1.98 percent to close at 1.432 million won, while shares of Hyundai Motor dropped 2.51 percent to 233,000 won. Shares of Posco also declined 0.3 percent to 336,000 won, while shares of Hyundai Mobis plunged 1.32 percent to 298,000 won. Investors also lost their appetite toward financial shares.

Shares of Shinhan Financial Group dropped 2.76 percent to 44,050 won, while shares of KB Financial also fell 0.63 percent to 39,650 won. Shares of Hana Financial fell 1.61 percent to 39,800 won.

SK Hynix was the only share that went up by 0.29 percent to 34,800 won among the top five blue-chip stocks.

Korea’s three-year bond yield, meanwhile, retreated from a five-month high as investors waited for clues on when the United States will start to trim stimulus that has inflated emerging-market asset prices. The won strengthened.

“Investors are in a wait-and-see mode before the U.S. jobs data and foreign buyers of bond futures slightly support the bonds,” said Kim Young-jung, a fixed-income analyst at Woori Futures in Seoul. “The U.S. economy is showing signs of recovery and, assuming the Fed tapering starts in March, the three-year yield is expected to rise to as much as 3.15 percent in the first half.”

The won rose 0.1 percent to 1,060.45 per dollar, data compiled by Bloomberg shows.

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