Market Commentary and Intraday News

No Relief Yet For South Korea Shares

224 days ago

(RTTNews) - The South Korea stock market has closed lower now in three straight trading days, declining more than 45 points or 2.4 percent in that span. The KOSPI finished just below the 1,950-point plateau, and now traders are bracing for another soft start when the market opens on Thursday.

The global forecast for the Asian markets continues to suggest consolidation thanks to continuing concerns over the situation in Europe. The downside may be capped, however, by bargain hunting following heavy losses on Wednesday. Also, the International Monetary Fund warned that banks in Europe may need to sell as much as $4.5 trillion in assets in 2013, in the absence of decisive and urgent policy measures. The European and U.S. markets finished lower and the Asian bourses figure to open in similar fashion.

The KOSPI finished sharply lower on Wednesday, led to the downside by damage from the technology stocks.

For the day, the index plummeted 30.82 points or 1.56 percent to finish at the daily low of 1,948.22 after peaking at 1,962.72. Volume was 442.6 million shares worth 4.66 trillion won. There were 595 decliners and 223 gainers.

Among the decliners, Samsung Electronics dropped 3.43 percent, while POSCO shed 1.4 percent and SK Hynix retreated 2.34 percent.

The lead from Wall Street remains negative as stocks were down on Wednesday, with traders expressing continued concerns about the outlook for the global economy. The losses extended a recent downward move for the markets, with the major averages falling to their lowest levels in about a month.

The weakness was partly a negative reaction to earnings news from aluminum giant Alcoa, which kicked off the earnings season after the close of trading on Tuesday. While Alcoa reported Q2 results that beat estimates, it also lowered its forecast for global aluminum demand growth in 2012 to 6 percent from 7 percent. The lower guidance led to worries of disappointing forecasts from other companies.

Adding to the negative sentiment, oil giant Chevron warned that it expects its Q3 earnings to be substantially lower than in the second quarter. Chevron said it expects upstream earnings to be hurt by foreign exchange losses and lower liftings and realizations.

Meanwhile, traders largely shrugged off the Federal Reserve's Beige Book, which said economic activity expanded modestly since the last report. Consumer spending was called flat to up slightly, but also noted improvement in residential real estate conditions. Conditions in the manufacturing sector were described as mixed but were said to have improved somewhat from the previous report.

The major U.S. averages were firmly lower on Wednesday as the Dow plunged 128.56 points or 1 percent to finish at 13,344.97, while the NASDAQ fell 13.24 points or 0.4 percent to end at 3,051.78 and the S&P 500 slid 8.92 points or 0.6 percent to close at 1,432.56.

In economic news, South Korea's central bank will on Thursday conclude its monetary policy meeting and then announce its decision on interest rates. The bank is expected to trim rates by 25 basis points, from 3.00 percent to 2.75 percent.

Also, producer prices in South Korea climbed 0.7 percent on month in September, the Bank of Korea said on Thursday, unchanged from the August reading. By category, agricultural, forestry & marine products were up 5.9 percent, while manufacturing industry products added 0.7 percent, electric power, water & gas supply eased 0.1 percent and services were flat. On year, producer prices were up 1.0 percent.

Also, the unemployment rate in South Korea remained unchanged in September, Statistics Korea said on Wednesday, holding at a seasonally adjusted 3.1 percent, while the unadjusted rate ticked down to 2.9 percent from 3 percent in August. On an unadjusted basis, the number of unemployed persons dropped to 752,000 in September from 764,000 in August. This was 0.8 percent lower than a year earlier.

Finally, South Korea banks household debt declined for the first time in six months in September, the Bank of Korea said on Wednesday. Total outstanding debt owed by households totaled KRW458.5 trillion at the end of September, down KRW 800 billion from the prior month.

In a separate report, the central bank said the broadest measure, L money supply, grew at a faster pace of 9.2 percent year-on-year in August, after marking a 9 percent increase in July. The L-measure of money supply includes cash, deposits at financial institutions and all money market instruments.

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