Business

Wed Jul 02 01:23:08 PDT 2008

By Park Jung-youn

SEOUL, July 2 (Reuters) – Seoul shares fell 2.6 percent on Wednesday, extending their losing streak to 5.5 percent over the past five sessions, with higher oil prices and deepening inflation fears slamming sentiment for equities.

The Korea Composite Stock Price Index <.KS11> closed 43 points lower at 1,623.60 points, its lowest finish since March 20, as a foreign investor selloff continued into its 18th straight session. Foreigners have offloaded 5 trillion won ($4.77 billion) worth of shares listed on the main index since June 5.

"It’s nearly official that we are in a bear market at this point, after a bullish rally of about five years," said Kim Hak-kyun, a market analyst at Korea Investment & Securities.

"Investors are offloading stocks in general for safer havens as macroeconomic conditions turn grimmer. Emerging market shares, including those of South Korea, have become less attractive as their growth is threatened by a slowdown in developed markets, while they are no longer so cheap," Kim added.

Technology bellwethers fell across the board, with LG Electronics <066570.KS> tumbling 4.58 percent to 114,500 won after a major U.S. brokerage cut its price target for the world’s No.4 handset maker on anticipation of dwindling earnings.

"We forecast LG Elec’s second quarter results to be lower than our previous estimates largely due to lower-than-expected handset shipments and limited margin recovery in the company’s display division," JP Morgan said in its report on Wednesday.

Samsung Electronics <005930.KS>, the world’s No.1 memory chip maker, slid 0.94 percent to 630,000 won and Hynix Semiconductor <000660.KS>, the No.2, fell 3.26 percent to 23,750 won.

Meanwhile shares in Doosan Group affiliates including Doosan Corp <000150.KS> and Doosan Heavy Industries <034020.KS> fell on talk that Doosan Heavy may sell treasury shares to finance an acquisition of Daewoo Shipbuilding & Marine Engineering <042660.KS>.

A Doosan Group official dismissed the rumors as "groundless."

"At times like this, investors do not exactly like the idea of deals that require heavy financing," said Lee Ji-hoon, an analyst at SK Securities.

Analysts also said that Doosan’s previous M&A deals, such as an acquisition of Ingersoll-Rand’s <IR.N> Bobcat machinery business, were viewed as an added financial burden as operational conditions grow more challenging.

Doosan Corp closed down 3.89 percent to 160,500 won, but still up from the session’s low of 143,500 won. Doosan Heavy Industries plunged 7.47 percent to 86,700 won.

Shares in steelmakers were hit by worries that slowing economies and rising raw material prices may dent their profits.

POSCO <005490.KS> lost 3.86 percent to 523,000 won and Hyundai Steel <004020.KS> fell 7.01 percent to 71,600 won.

"South Korean steel shares fell after global steel shares tumbled overnight. It just seems sentiment has turned very sour," said Kim Hyun-tae, an analyst at Goodmorning Shinhan Securities.

Meanwhile persistent strength in oil sent energy-sensitive issues such as Korean Air Line <003490.KS> and Asiana Airlines <020560.KS> sharply lower after U.S. crude <CLc1> settled up at nearly $141 a barrel on Tuesday.

Korean Air fell 8.33 percent to 44,000 won and Asiana went down 4.8 percent to 5,160 won.

($1=1047.9 Won)

Provided by Reuters

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