Seoul: Stocks end weaker as Japan export curbs weigh

[SEOUL] South Korean shares dropped on Thursday as Seoul and Tokyo wrangled over export restrictions ahead of Japan's decision on whether to remove the export-dependent economy from easy-trade list. The Korean won fell, while the benchmark bond yield rose.

Japan's planned revision of a law to take South Korea off its so-called "white list" comes amid a deepening row over compensation for wartime forced labour and after Japan tightened curbs this month on exports to South Korea of high-tech materials used for making memory chips and display panels.

South Korea's foreign minister Kang Kyung-wha warned that if Japan removes South Korea from its list of countries with minimum trade restrictions, Seoul would have to review bilateral security cooperation.

Relations between Japan and South Korea are arguably at their lowest since they normalised ties in 1965, with a spiralling diplomatic and trade row threatening to disrupt the global supply of semiconductors and undercut security cooperation on North Korea.

Ms Kang asked her Japanese counterpart to keep the country on a "white list" of countries that enjoy minimum trade restrictions, Japan's Kyodo News reported. Investors hold lean hopes of a positive negotiation between South Korea and Japan, said Lee Won, an analyst at Bookook Securities. The Kospi index has been affected by remarks of diplomatic officials, he added.

The Seoul stock market's main Kospi index ended down 7.22 points or 0.36 per cent at 2,017.33 points. Earlier in the session, the index extended losses to hit its lowest since Jan. 4.

South Korea's factory activity contracted further in July as new export orders shrank the most in nearly six years, a private survey showed.

South Korea's exports tumbled for an eighth straight month in July, with persistently weak global demand and an escalating dispute with Japan painting an increasingly gloomy picture for Asia's fourth-largest economy.

Shares of SM Entertainment plunge 8 per cent after South Korea's biggest talent agency disappointed investors in its response to a shareholder's open letter.

Foreigners were net sellers of 4.9 billion won worth of shares on the main board.

The won was quoted at 1,188.5 per dollar on the onshore settlement platform, 0.45 per cent lower than its previous close at 1,183.1.

In offshore trading, the won was quoted at 1,188.6 per U.S. dollar, down 0.1 per cent from the previous session, while in non-deliverable forward trading its one-month contract was quoted at 1,186.5 per dollar.

MSCI's broadest index of Asia-Pacific shares outside Japan was down 0.86 per cent, after U.S. stocks declined. Japanese stocks rose 0.09 per cent.

The KOSPI dropped 1.16 per cent so far this year, and lost 4.7 per cent in the previous 30 trading sessions.

The current price-to-earnings ratio is 12.10, the dividend yield is 1.28 per cent and the market capitalisation is 1,242.04 trillion won.

The trading volume during the session in the Kospi index was 455.44 million shares and, of the total traded issues of 891, the number of advancing shares was 252.

The won lost 6.1 per cent against the US dollar so far this year.

In money and debt markets, September futures on three-year treasury bonds dipped 0.09 point to 110.81, while the 3-month Certificate of Deposit rate was quoted at 1.50 per cent.

The most liquid 3-year Korean treasury bond yield rose by 0.8 basis points to 1.302 per cent, while the benchmark 10-year yield rose by 0.6 basis point to 1.397 per cent.

REUTERS