Foreign sales send markets downward

Korean shares plummeted yesterday due to a major selling spree by foreign investors. Local institutional and retail investors, net buyers of the day, were not enough to stop the Seoul bourse from falling.

The benchmark Kospi dropped 1.09 percent, or 21.19 points, to close at 1,919.96.

Samsung Electronics slipped 0.63 percent to 1,272,000 won ($1,173). LG Electronics was down 3.48 percent to 63,800 won, after reports said Chinese electronics-maker Lenovo acquired Motorola. SK Hynix, the world’s second-largest memory chip maker, was up 0.26 percent to 37,950 won.

Hyundai Motor was down 1.28 percent to 231,500 won after its January sales dropped 0.3 percent compared to the same month last year. Sister-company Kia Motors was also down 0.74 percent to 53,600 won. Hyundai Mobis, their auto-parts arm, dropped 2.9 percent to 301,000 won.

The steel manufacturing industry mostly dropped. Posco, the nation’s largest steel-maker, slipped 1.17 percent to 295,000 won. Hyundai Steel also dropped 1.83 percent to 75,000 won.

Meanwhile, Hyundai Merchant Marine soared 8.83 percent to 15,400 won after media reported the government finally received an answer from North Korea about holding family reunions.

The won weakened 1.3 percent from Jan. 29 to 1,084.45 won per dollar at the close in Seoul, according to prices from local banks compiled by Bloomberg. Korea’s financial markets were closed Jan. 30 and 31 for the Lunar New Year holidays.

Currency experts cited a fall in the Chinese consumer index as a reason for the weakened won.

China’s Purchasing Managers’ Index for manufacturing fell to a six-month low of 50.5 in January. Fifty is the dividing line between expansion and contraction.

One month implied volatility in the won, a gauge of expected moves in the exchange rate used to price options, rose 45 basis points, or 0.45 percentage point, from Jan. 31 to 8.41 percent.

The yield on Korea’s 3 percent government bonds due December 2016 was unchanged at 2.88 percent, according to Korea Exchange prices. Five-year rates fell two basis points to 3.22 percent.

BY KIM JI-YOON, BLOOMBERG [jiyoon.kim@joongang.co.kr]