Seoul: Shares slump amid global pressure; won firmer

[SEOUL] South Korean shares dropped sharply on Thursday as investors returned from the long Lunar New Year holidays to find a global selloff of riskier assets was still raging.

Tensions with North Korea heightened caution further.

On Wednesday, South Korea suspended operations at a jointly run factory park just inside North Korea following the North's long-range rocket launch over the weekend, cutting off an important source of revenue for the impoverished North.

The Korea Composite Stock Price Index (KOSPI) was down 2.5 per cent at 1,870.85 points as of 0230 GMT.

"Markets appear quite defensive today after heavy losses in banking in Europe and Japan lately," said Lee Jae-man, a stock analyst at Hana Daetoo Securities.

Federal Reserve Chair Janet Yellen said on Wednesday she expected continued US economic growth would allow the Fed to pursue its plan of "gradual" rate hikes, but her comments kept the central bank's options open.

Losses were seen all across the main board, with all industry sub-sectors in negative territory. Declining shares outnumbered winners nearly 10-to-1.

Shares in Samsung Electronics Co Ltd shed 2.9 per cent, while automaker Hyundai Motor Co lost 1.5 per cent.

Meanwhile, defence industry-related shares surged after suspending operations at joint factory park, with Victek Co Ltd and Speco rising 20.8 per cent and 16.1 per cent, respectively.

Foreign investors unloaded a net 74.3 billion won (S$86.25 million) worth of KOSPI shares by midday, weighing on the index.

The South Korean won trimmed earlier gains against the dollar after Yellen's comments hinted the next rate hike will be a long time coming, sending the dollar lower.

The local currency was trading up 0.1 per cent at 1,195.8 per dollar, after rising as much as 0.6 per cent.

March futures on three-year treasury bonds gained 0.20 points at 110.36.

Data showed on Thursday that foreigners pulled more funds out of South Korea's stock and bond markets for a second month in January, extending a selloff sparked by the first US rate hike in almost a decade in December.

REUTERS