Seoul shares tumble to 3-year low on economic woes

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SEOUL, Oct. 22 (Yonhap) -- South Korean stocks plunged over 5 percent to a three-year low Wednesday as investors remained jittery over a global recession despite a government financial aid package. The local currency tumbled against the U.S. dollar.

The benchmark Korea Composite Stock Price Index (KOSPI) plummeted 61.51 points,
or 5.14 percent, to a yearly low of 1,134.59, also the weakest since Sept. 6,
2005. Volume was moderate at 367.2 million shares worth 5.17 trillion won (US$3.8
billion), with losers outpacing gainers 758 to 82.
"Overall sentiment was severely chilled amid worries over a global economic
recession. Investors do not seem to have confidence in the government's measures
to shore up the financial markets and boost the construction sector," said Lee
Kyoung-su, an analyst at Taurus Investment & Securities Co.
The KOSPI declined below the 1,100-point mark at one point in afternoon trading,
falling as much as 8.41 percent, but pared some losses later due to futures
buying by foreign investors.
Steep losses caused the Korea Exchange (KRX), the bourse operator, to suspend
program trading at 2:00 p.m. for five minutes after the main index's futures
prices fell more than 5 percent. It was the ninth such emergency break this year.
The government unveiled on Sunday sweeping measures aimed at providing three-year
state guarantees for banks' foreign debts worth up to $100 billion and injecting
$30 billion into dollar-starved banks and companies. It also said Tuesday that it
will spend around 5 trillion won to buy land and unsold houses from builders in a
bid to boost the nation's sluggish construction sector and revive the broader
economy.
"The effects of the sweeping measures may be felt after the government implements
the steps, but until that, investors' reactions to the moves may remain sluggish
as sentiment was already dented," Lee said.
Most shares traded in negative territory, led by heavy foreign selling. Foreign
investors went on a selling spree of local stocks, dumping a net 363 billion won
worth of stocks on the Seoul bourse.
Builders lost ground despite the announcement of the government's measures to
help the country's slumping real estate markets. Top construction firm Daewoo
Engineering & Construction fell 7.3 percent to 10,800 won.
Market leader Samsung Electronics lost 2.12 percent to 508,000 won on its
decision to scrap a bid to purchase U.S. flash memory giant SanDisk Corp. due to
the current financial crisis and stalled negotiations between the parties. Chip
giant Hynix Semiconductor fell by the daily limit of 15 percent to 12,200 won.
Top steelmaker POSCO declined 7.79 percent to 296,000 won and top automaker
Hyundai Motor plummeted 14.21 percent to 50,100 won.
The country's stock prices have fallen about 40 percent so far this year after
reaching an all-time high of 2,064.85 in late October last year.
U.S. stocks declined Tuesday as weaker earnings reports by tech firms fanned
fears of an economic downturn. The Dow Jones industrial average fell 2.5 percent
and the tech-dominated Nasdaq composite index declined 4.14 percent.
The local currency closed at 1,363 won to the dollar, down 42.9 won from
Tuesday's close, as dollar demand remained strong driven by foreign stock
investors, dealers said.
Bond prices, which move inversely to yields, rose on hopes of a rate cut. The
return on three-year Treasuries fell 0.2 percentage point to 4.8 percent and the
benchmark yield on five-year government bonds also declined 0.2 percentage point
to 4.84 percent.
sooyeon@yna.co.kr
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