Seoul shares end up 0.71 pct on China`s rate hike

(ATTN: ADDS bond yields at bottom)
SEOUL, Oct. 20 (Yonhap) -- South Korean stocks finished 0.71 percent higher
Wednesday as investors were confident that China's rate hike will prop up the
global economy in the long run, analysts said. The local currency gained ground
to the U.S. dollar.
Wiping out earlier losses, the benchmark Korea Composite Stock Price Index
(KOSPI) rose 13.12 points to 1,870.44, snapping a two-session losing streak.
Trading volume was moderate at 360 million shares worth 5.81 trillion won
(US$5.16 billion) with gainers outnumbering losers 509 to 317.
"China's rate hike is expected to have a bigger impact in U.S. markets but in
South Korea, the impact has been reflected earlier," said Shim Jae-yub, an
analyst at Meritz Securities Co. "The news propped up investor confidence that
China is certain about its economic growth."
The KOSPI opened lower, as China's surprise overnight decision to raise the
benchmark interest rate by 0.25 percentage points stoked worries that it could
drag the world's economic recovery down. But the key index reversed course on
belief that the market pullback would be short-lived.
"A recent surge in global equities was driven by speculations that the monetary
easing by advanced economies will pump more liquidity into the market," said Kim
Hyoung-ryoul, an analyst at NH Investment & Securities Co. "As China's rate hike
erased worries about rising inflationary pressure, investors expected there can
be more monetary easing and hence more liquidity."
Most sectors gathered ground. Tech shares bounced back from recent sluggish
trading, with market heavyweight Samsung Electronics up 0.54 percent to 745,000
won. Chip giant Hynix Semiconductor jumped 4.6 percent to 23,900 won after a
local brokerage upgraded its stock rating.
Top automaker Hyundai Motor gained 3.23 percent to 160,000 won and its smaller
affiliate Kia Motors added 1.69 percent to 39,000 won.
But builders and steelmakers took the brunt of China's rate hike, which was aimed
at stemming rising property prices. The move could consequently hurt demand in
the construction market.
"The U.S. dollar's rebound was also feared to hurt commodity prices, weighing on
commodity makers' profits," said Kim Kyung-joong, an analyst at Eugene Investment
& Securities Co.
Steel giant POSCO fell 0.92 percent to 484,500 won and its smaller rival Hyundai
Steel sank 1.34 percent to 110,500 won. No. 3 builder Daewoo Engineering &
Construction was down 1.69 percent to 11,650 won.
The local currency closed at 1,126.9 won to the greenback, up 3.6 won from
Tuesday's close, on speculations that exporters are converting overseas earnings
in U.S. dollar to the local currency, dealers said.
Bond prices, which move inversely to yields, closed sharply lower. The yield on
three-year Treasury notes added 0.06 percentage point to 3.26 percent and the
return on benchmark five-year government bonds also rose 0.06 percentage point to
3.7 percent.
ylee@yna.co.kr
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