Seoul: Stocks fall most in 5 months on US recession woes; bonds rally

[SEOUL] South Korea's Kospi stock index extended its loss on Monday by falling nearly 2 per cent, marking the sharpest daily drop since Oct 23 last year, as fears of global economic slowdown spooked investors. Both the Korean won and the benchmark bond yield stumbled.

The Seoul stock market's main Kospi index closed down 42.09 points, or 1.92 per cent, to 2,144.86 points. Junior Kosdaq shrank 2.25 per cent.

US markets received a clear warning of coming recession on Friday when the spread between yields on three-month Treasury bills and 10-year notes fell below zero for the first time since 2007 after US manufacturing data missed estimates. Foreigners were net sellers of 69.6 billion won worth of shares on the main board.

Foreigners' selloff pulled down the Korean won, and this has fuelled their desire for profit-taking, said Lee Kyoung-min, an analyst from Daishin Securities. Export-exposed sectors such as chemical, IT and auto shares fell considerably, Mr Lee added.

Responding to the inversion, South Korea's June futures on three-year treasury bonds hit the highest since late August 2017 during earlier trading, while the three-month Certificate of Deposit rate was quoted at 1.90 per cent.

The most liquid three-year Korean treasury bond yield fell by 3.4 basis points to 1.766 per cent, marking the lowest since Jan 4 to 1.764 per cent, while the benchmark 10-year yield fell by 5.6 basis points to 1.878 per cent, hovering near the lowest since November 2016.

South Korea's central bank chief said the bank may change its current cautious stance on monetary policy should "recovery sentiment" worsen significantly, signalling it could ease policies if needed.

The won was quoted at 1,134.2 per dollar on the onshore settlement platform, 0.36 per cent lower than its previous close at 1,130.1.

In offshore trading, the won was quoted at 1,133.8 per US dollar, up 0.1 per cent from the previous day, while in one-year non-deliverable forward trading its one-month contract was quoted at 1,132.6 per dollar.

MSCI's broadest index of Asia-Pacific shares outside Japan was down 1.70 per cent, after US stocks fell sharply on recession worries. Japanese stocks fell 3.01 per cent.

The Kospi has risen 5.09 per cent so far this year, and fell 0.7 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 on the KOSPI index was 302.12 million shares and, of the total traded issues of 892, the number of advancing shares was 126.

The won has lost 1.6 per cent against the US dollar this year. 

REUTERS