Budget deal in U.S. sends stocks lower

Korean stocks closed 0.51 percent lower yesterday as investors speculate the budget deal in the United States will give the Federal Reserve enough confidence to start reducing its stimulus as soon as next week. The local currency gained against the greenback.

The benchmark Kospi slid 10.04 points to finish at 1,967.93. Trading volume was low at 234.4 million shares, worth 3.86 trillion won ($3.66 billion), with 418 losers and 372 gainers.

Retail investors scooped up 303.6 billion won of shares, while institutional investors bought a net 365.1 billion won worth of stocks. Foreign investors sold more Korean stocks than they bought for a third day, selling 691.5 billion won of shares.

“The U.S. budget deal added to uncertainty about Fed tapering,” said Moon Hong-cheol, a fixed-income strategist at Dongbu Securities. “The BOK kept the rate unchanged after assessing that the economic recovery is on track.”

By industry, midsize and large-cap stocks fell while small caps rose. Construction, down 1.66 percent, fell the most, while machinery declined 1.44 percent and electronics lost 0.7 percent.

On the other hand, transportation and storage gained 0.6 percent, and paper and timber edged up 0.56 percent.

Most large caps also showed gains, although market bellwether Samsung Electronics closed 0.70 percent lower. Hyundai Mobis gained 0.52 percent and Hyundai Motor inched up 0.44 percent.

At the news of Hanjin Shipping and Hanjin Shipping Holdings Company merging, Hanjin Shipping rose 0.85 percent and Hanjin Shipping Holdings Company closed 1.45 percent higher.

Meanwhile, Doosan Heavy Industries shed 1.02 percent due to the disposal of treasury stock, and Byuksan Construction plunged 14.95 percent for the same reason.

The won advanced 0.1 percent to 1,050.99 per dollar in Seoul. One-month implied volatility, a gauge of expected moves in the exchange rate used to price options, rose nine basis points to 6.04 percent.

The yield on Korea’s 3 percent sovereign bonds due December 2016 climbed one basis point, or 0.01 percent, to 3.01 percent, Korea Exchange prices show.

BY KIM JUNG-YOON, BLOOMBERG [kjy@joongang.co.kr]