Seoul: Shares rebound on move to tighten short-selling rules, global stimulus hopes

[SEOUL] South Korean shares recouped early losses to settle higher on Tuesday as the government pledged to clamp down on short-selling of stocks, and as hopes of global policy stimulus supported sentiment. The won strengthened, while the benchmark bond yield rose.

South Korea will tighten short-selling rules on stocks starting Wednesday after the coronavirus outbreak pushed domestic equities to the brink of a bear market, the finance ministry said. Seoul shares dropped more than 4 per cent on Monday.

The benchmark Kospi closed up 8.16 points, or 0.42 per cent, to 1,962.93. It slid as much as 1.03 per cent earlier in the session to a six-month low.

Foreigners net sold around 938.7 billion won (S$1.09 billion) worth of shares on the mainboard.

South Korea reported 35 new virus cases, bringing the national tally to 7,513. This came after the rate of new infections fell to its lowest in 11 days on Monday.

"Kospi will remain shaky for sometime as the selloff by foreign investors continue, while the market volatility remains high depending on the stability in the US stock markets," said Huh Jae-hwan, an analyst at Eugene Investment & Securities.

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US President Donald Trump on Monday said he will be taking "major" steps to gird the economy against the virus impact and pledged to discuss a payroll tax cut. He was due to hold a press conference later on Tuesday.

The US Federal Reserve stepped up its repo operations by increasing the size of its fund injections.

The European Central Bank will meet on Thursday and markets are positioned for a 10 basis point cut to help shore up the economy and inflation.

The won was quoted at 1,193.2 per dollar on the onshore settlement platform, 0.92 per cent higher than its previous close at 1,204.2.

In offshore trading, the won was quoted at 1,193.2 per US dollar, up 0.6 per cent from the previous day. In non-deliverable forward trading, its one-month contract was quoted at 1,192.4 per US dollar.

MSCI's broadest index of Asia-Pacific shares outside Japan rose 1.37 per cent.

The trading volume during the session in the Kospi index was 628.23 million shares. Of the total traded issues of 905, the number of advancing shares was 318.

The Kospi has fallen 10.68 per cent so far this year, while the won has lost 3.1 per cent.

In money and debt markets, March futures on three-year treasury bonds fell 0.17 points to 111.46, while the three-month Certificate of Deposit rate was quoted at 1.40 per cent in late afternoon trade.

The most liquid three-year Korean treasury bond yield rose by 2.2 basis points to 1.076 per cent in late afternoon trade, while the benchmark 10-year yield rose by 4.9 basis points to 1.347 per cent.

REUTERS