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South Korean stocks end weaker as China data disappoints; won falls

[SEOUL] South Korea's KOSPI stock index shed early gains to end lower on Friday as factory activity shrank across Asia, while lacklustre China data offset optimism over trade deal between Beijing and Washington. The Korean won and bond yields dropped.

US President Donald Trump said he would meet Chinese President Xi Jinping soon to try to seal a comprehensive trade deal as the top US negotiator reported "substantial progress" in the talks, sending the South Korean shares up earlier in the session.

Factory activity shrank across much of Asia in January, falling to the weakest in years in several countries and adding to worries that trade tariffs and cooling demand in China pose an increasing threat to global growth.

China's factory activity shrank the most in almost three years in January as new orders slumped further and output fell, the private Caixin/Markit PMI survey showed. The numbers were weaker than Thursday's official PMI survey, but both suggested the economy is continuing to slow in the new year.

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South Korean factories also got off to a grim start in 2019 as activity in January contracted at the joint-fastest pace in over two years, a private survey showed on Friday, with new export orders continuing to shrink in yet another blow to the trade-reliant economy.

South Korea's exports shrank for a second straight month in January as faltering demand in China hit prices of memory chips and petrochemical products, adding further stress on the economy from slowing global growth and the US-Sino trade dispute.

The KOSPI closed down 1.39 points or 0.06 per cent at 2,203.46. For the week, the benchmark index rose 1.2 per cent, extending its rally to a fourth week, the longest successive weekly gains in 15 months.

South Korean financial markets are closed from Monday through Wednesday for Lunar New Year's Day holiday. Markets will resume trade at normal hours on Thursday, Feb. 7.

South Korea's shipbuilders dropped after Hyundai Heavy Industries Co Ltd announced a share swap deal worth 2.1 trillion won (S$2.53 billion) to take over second-ranked Daewoo Shipbuilding & Marine Engineering Co Ltd and create a global heavyweight controlling over 20 per cent of the market. Daewoo Shipbuilding closed down 8.7 per cent, while Hyundai Heavy fell 7.6 per cent.

Shares of South Korean firms exposed to North Korea jumped on US special envoy's remarks that North Korean leader committed to the dismantlement and destruction of nuclear facilities. Daea TI Co Ltd and Ilshin Stone Co Ltd ended up 17.4 per cent and 7.4 per cent, respectively.

The won was quoted at 1,118.8 per US dollar on the onshore settlement platform, 0.55 per cent weaker than its previous close at 1,112.7. The currency inched up 0.2 per cent on the week, rising for a second consecutive week.

 In offshore trading, the won was quoted at 1,118.6 per dollar, down 0.65 per cent from the previous day, while in one-year non-deliverable forwards it was being asked at 1,102.95 per dollar.

REUTERS