Shares close lower as Chinese rate cut disappoints

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Shares close lower as Chinese rate cut disappoints

Published: 20 Jun. 2023, 17:29 Updated: 21 Jun. 2023, 16:03

Screens in Hana Bank's trading room in central Seoul show the Kospi closing at 2,604.91 points on Tuesday, down 0.18 percent, or 4.59 points, from the previous trading session. [YONHAP]

Stocks closed lower for the second consecutive trading session Tuesday as the Chinese central bank's smaller-than-expected rate cut discouraged investors. The won rose against the dollar.

The benchmark Kospi slipped 4.59 points, or 0.18 percent, to close at 2,604.91. Trade volume was moderate at 712.8 million shares worth 10.7 trillion won ($8.35 billion), with decliners outstripping gainers 545 to 325.

"The markets had their eyes on whether Beijing will come up with a fresh stimulus to spur consumption. It will have an impact on our stocks in sectors like defense, machineries, steel and chemicals," said Han Ji-young, an analyst at Kiwoom Securities.

The People's Bank of China cut the benchmark one-year loan prime rate (LPR) and the five-year LPR by 0.1 percentage point each, causing disappointment as the reduction in the longer-term rate was smaller than the market projection.

The Chinese central bank's decision reflected limited room for Beijing to take steps to boost its slowing economy amid concerns about rising risks in the local property market.

Market observers are also paying attention to what U.S. Federal Reserve Chair Jerome Powell will say during congressional testimony slated for Wednesday and Thursday.

Some Fed officials backed the need for further interest rate hikes by the year's end, dashing hopes that the U.S. central bank would end its rate hikes to tame global inflation.

Wall Street closed Monday for the Juneteenth holiday, celebrating the emancipation of enslaved Black Americans.

In Seoul, steel, energy and chemical stocks finished down.

Steelmaker Posco Holding fell 1.66 percent to 386,000 won, and chemicals firm LG Chem lost 1.73 percent to 739,000 won.

Energy company SK Innovation dipped 2.33 percent to 184,100 won.

Samsung Electronics was among the gainers, finishing up 0.28 percent at 71,400 won. SK hynix also climbed 1.13 percent to 116,100 won.

The local currency ended at 1,280.3 won against the dollar, down 1.7 won from Monday's close.

Bond prices, which move inversely to yields, closed mixed. The yield on three-year government bonds retreated 2.5 basis points to 3.560 percent, and the yield on benchmark 10-year government bonds rose 4.6 basis points to 3.767 percent.

BY SOHN DONG-JOO, YONHAP [[email protected]]