Seoul: Stocks weaken on US-North Korea summit collapse; won flat

[SEOUL] South Korea's Kospi stock index fell on Monday after the summit between North Korea and the United States collapsed last week, while investors moved to the Chinese market amid hopes that the world's two biggest economies were close to striking a trade deal later this month. The South Korean won closed flat, while the benchmark bond yield rose.

The Wall Street Journal reported on Sunday US President Donald Trump and Chinese President Xi Jinping could reach a formal trade deal at a summit around March 27, given progress in talks between the two countries.

China's bluechip index was up nearly 1 per cent, while Hong Kong's Hang Seng index added 0.6 per cent.

The Kospi index ended 4.78 points, or 0.22 per cent, lower at 2,190.66 points, extending its loss to a second session. South Korean financial markets resumed trading on Monday after a public holiday on Friday.

South Korean stocks weakened as the disappointment from the collapse of the second summit between the United States and North Korea froze investor sentiment, while the risk appetite in Asian emerging markets was focused on Chinese markets on signs of a possible trade deal between the US and China, said Lee Won, an analyst at Bookook Securities.

MSCI to quadruple the weighting of Chinese mainland shares in its global benchmarks, also boosting Chinese stock market, which may have led to foreign investment switching out of the Korean market, Lee added.

Global index provider MSCI will quadruple the weighting of Chinese mainland shares in its global benchmarks later this year, it said on Thursday, potentially drawing more than US$80 billion of fresh foreign inflows to the world's second-biggest economy.

Shares of South Korean firms with exposure to North Korea fell after the second summit between US President Donald Trump and North Korean leader Kim Jong Un collapsed on Thursday over sanctions, raising concerns about the future of their denuclearisation negotiations.

Railway-related stocks such as Busan Industrial Co Ltd and Korea Cement both fell more than 5 per cent, while companies with a branch in Kaesong Industrial Complex in North Korea such as In The F Co Ltd dipped 3.9 per cent. Other stocks such as Hyundai Rotem Co and Hyundai Elevator Co Ltd ended 7.1 per cent and 5.4 per cent lower, respectively.

The country's largest carmaker Hyundai Motor Co and its affiliates Kia Motors Corp and Hyundai Mobis Co Ltd tumbled as much as 4.4 per cent, 3.7 per cent and 5.4 per cent, respectively, after more vehicle recalls.

Kia Motors and affiliate Hyundai Motor said on Thursday they were recalling around 534,000 more US vehicles at risk of engine fires.

The won was quoted at 1,124.9 per dollar on the onshore settlement platform, 0.02 per cent lower than its previous close at 1,124.7.

In offshore trading, the won was quoted at 1,125.2 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 1,123.7 per dollar.

MSCI's broadest index of Asia-Pacific shares outside Japan was up 0.26 per cent, after US stocks ended the previous session with mild gains. Japanese stocks rose 1.02 per cent.

The Kospi has risen 7.33 per cent so far this year, and gained 6.3 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.

Foreigners were net sellers of 123.3 billion won worth of shares on the main board.

The trading volume during the session on the Kospi index was 367.75 million shares and, of the total traded issues of 896, the number of advancing shares was 578.

The won has lost 0.8 per cent against the US dollar this year.

In money and debt markets, March futures on three-year treasury bonds fell 0.07 point to 109.15, while the three-month Certificate of Deposit rate was quoted at 1.89 per cent.

The most liquid three-year Korean treasury bond yield rose 2.1 basis points to 1.834 per cent, while the benchmark 10-year yield gained four basis points to 2.027 per cent.

REUTERS