Seoul: Stocks down on Fed hike, comments on cutting bond portfolio

[SEOUL] South Korean shares slid to a one-week low early on Thursday as the US Federal Reserve raised interest rates and said it would reduce its holdings in bonds and other securities, signalling a more positive outlook on the US economy.

The Korea Composite Stock Price Index (Kospi) was down 0.8 per cent at 2,354.78 points as of 0234 GMT, its weakest level since June 8.

"The Fed also forecasted one more rate hike within this year and seemed very confident about US economic growth in the second-half. Such hawkish stance seems to be causing jitters, among local institutions especially," said Cho Byung-Hyun, a stock analyst at Yuanta Securities.

Domestic institutions have sold a net 213.8 billion won (S$262.05 million) worth of Kospi shares near mid-session, putting pressure on the index.

Mr Cho, however, said the current adjustment is just a technical one and will not hurt the Kospi's upward trend.

"Strong signs of global economic recovery will boost investors' sentiment, pushing the Kospi up in the end. The market should notice that foreign investors are not selling off the local equities today," added Mr Cho.

Offshore investors were set to be net buyers though the amount was small, by about 4.2 billion won.

Posco lost 2.5 per cent and Hyundai Motor was down 3.3 per cent.

Decliners outnumbered advancers 610 to 189.

The South Korean won gave up its gains after touching a one-week high as the dollar bounced back up on the Fed's policy decision.

The won was steady at 1,123.8 to the US dollar compared with Wednesday's close of 1,123.9.

June futures on three-year treasury bonds gained 0.06 point to 109.62.

REUTERS