Seoul: Stocks fall on Fed tightening fears

[SEOUL] South Korean shares fell on Wednesday (Apr 6) as hawkish comments from US Federal Reserve officials raised fears of aggressive monetary tightening. The Korean won weakened, while the benchmark bond yield rose.

The benchmark Kospi closed down 24.17 points, or 0.88 per cent, at 2,735.03, marking the biggest daily fall since Mar 15.

Fed Governor Lael Brainard said on Tuesday she expected a combination of interest rate increases and a rapid balance sheet run-off to bring US monetary policy to a "more neutral position" later this year, with further tightening to follow as needed.

After her comments, worries grew that minutes of the Fed's last meeting may turn out to be much more hawkish than expected, said Lee Kyoung-min, an analyst at Daishin Securities.

Release of the minutes is scheduled later in the day.

Investors were also waiting to see how a fresh round of Western sanctions on Russia would play out. The US and its allies will on Wednesday impose new sanctions on Russian banks and officials and ban new investment in Russia, the White House said.

Among heavyweights, technology giant Samsung Electronics fell 1.01 per cent and peer SK Hynix dropped 3 per cent, while battery maker LG Energy Solution lost 1 per cent.

Foreigners were net sellers of 578.5 billion won (S$645.8 million) worth of shares on the main board, marking the biggest daily sell-off in 3 weeks.

The won closed trading at 1,218.3 per dollar on the onshore settlement platform, 0.46 per cent lower than its previous close.

In offshore trading, the won was quoted flat at 1,218 per dollar, while in non-deliverable forward trading its 1-month contract was quoted at 1,218.4.

In money and debt markets, June futures on 3-year treasury bonds fell 0.27 point to 105.25 in late afternoon trade.

The most liquid 3-year Korean treasury bond yield rose by 9.5 basis points to 2.972 per cent, the highest since December 2013, while the benchmark 10-year yield was up 8 basis points at 3.16 per cent, after hitting its highest since June 2014. REUTERS