South Korea: Stocks, won steady ahead of US- North Korea summit outcome

[SEOUL] South Korean shares and the won held in narrow ranges on Tuesday as investors awaited the outcome of a historic meeting between US President Donald Trump and North Korean leader Kim Jong Un.

The Korea Composite Stock Price Index (Kospi) was down 0.07 per cent at 2,468.51 points as of 0236 GMT. The won stood at 1,074.8 against the dollar, up 0.04 per cent versus Monday's close of 1,075.2.

"Many expect a peace treaty to come out of the Trump-Kim summit, not necessarily today but through other meetings in weeks to come, and its largely priced in," said Kim Doo Un, an analyst at KB Investment & Securities. Kim was referring to recent upswings in the KOSPI as the index has risen in seven of the past nine sessions.

Going into the summit in Singapore, Mr Trump said he felt "really great" and expected "tremendous success" to come out of Tuesday's summit, which could push the US and North Korea to reach a peace treaty and provide the isolated regime a security guarantee.

"The peace on the Korean peninsula could deliver significant benefits to both North and South Korea, including potentially a re-rating for South Korean stocks," DBS said in a report, adding the summit meeting should help to remove a major tail risk for the region's markets and economies.

"However, it would be prudent to contain excessive optimism, given the enormous gulf between the two Koreas and the costs of reunification," DBS added. North Korea has remained on combat alert since the Korean War ended in 1953 with a truce and not a peace treaty.

South Korean stocks that can potentially benefit from inter-Korea projects continued to climb. Hyundai Cement , which could benefit from infrastructure projects for the North, jumped 6 per cent, while Seohee Construction surged 18 per cent following reports that the company could secure projects aimed at removing landmines in the border areas. But the steam came out of some shares related to inter-Korea projects that had rallied for weeks leading up to the summit, including Hyundai Elevator, which fell 2 per cent.

Market heavyweights such as Samsung Electronics and SK Hyunix edged down 1 per cent and 0.3 per cent, respectively.

Offshore investors were on track to be net sellers for the day, offloading 119 billion won of KOSPI shares near mid-session. Declining issues outnumbered advancing ones 440 to 345.

The spread on South Korea's 5-year credit default swap, the contract that offers investor protection against default on debt - rose to 42/43 basis points on early Tuesday, up slightly from a day earlier.

June futures on three-year treasury bonds gained 0.06 points to 107.06.

REUTERS