South Korea Stocks Fall on Interest-Rate Concern; Samsung Drops
By Kyung Bok Cho
June 13 (Bloomberg) -- South Korean stocks fell after former Federal Reserve Chairman Alan Greenspan predicted increased borrowing costs and U.S. bond yields gained to a five-year high, suggesting that investors are expecting higher interest rates. Samsung Electronics Co. paced the retreat.
``A short-term correction looks inevitable for global markets,'' said Chang In Whan, president of KTB Asset Management Co. in Seoul, which has about $3.8 billion in equity assets. ``There's inflation pressure all over the world, in the U.S., in China, in the Eurozone. More interest-rate increases are likely, which will put a sustained squeeze on liquidity.''
The Kospi index lost 7.39, or 0.4 percent, to 1722.49 as of 11:04 a.m. in Seoul. The Kosdaq was little changed at 762.72. Kospi 200 futures expiring in June slid 0.5 percent to 218.45, while the underlying index dropped 0.6 percent to 218.68.
Samsung Electronics, the most valuable company on the benchmark, declined 6,000 won, or 1 percent, to 572,000. Hyundai Heavy Industries Co., the world's biggest shipbuilder, retreated 9,500 won, or 3 percent, to 302,500.
Referring to historically low premiums on emerging-market debt, Greenspan said yesterday in New York that ``it ain't going to continue that way. And indeed, all the spreads you are looking at, including your spreads relative to the 10-year are going to start to open up and the 10-year is going to be moving as well.''
Hynix Semiconductor Inc., the world's second-largest computer-memory maker, slid 950 won, or 3 percent, to 30,500. Kookmin Bank, the largest South Korean lender, lost 800 won, or 0.9 percent, to 85,700.
Interest Rates
The yield on the 10-year Treasury note climbed to a five- year high following Greenspan's remarks. The yield on South Korea's benchmark five-year government bond jumped six basis points to 5.48 percent as of 10:47 a.m., the highest since December 2005.
The Bank of Korea last week left its benchmark rate at 4.5 percent, the highest in almost six years, and Governor Lee Seong Tae said the economy has performed better than policy makers expected.
``The Bank of Korea could raise rates once this year to 4.75 percent,'' said KTB Asset's Chang.
The European Central Bank raised its benchmark rate last week to a six-year high and signaled another increase is likely. Inflation in China, the world's fastest-growing major economy, accelerated in May and exceeded economists' estimates. China will probably increase lending and deposit rates at least once more in 2007, a Bloomberg News survey showed.
Shinhan Financial Group Ltd., South Korea's second-largest lender, dropped 600 won, or 1.1 percent, to 56,400. Hyundai Motor Co., which sells four out of five cars it makes overseas, declined 700 won, or 1 percent, to 72,100.
CJ, S-Oil
Separately, Hyundai Motor's labor union said yesterday it plans to strike in the last week of June to protest the government's attempts to ratify a free-trade agreement with the U.S. About 43,000 workers will walk off their jobs for between two and six hours during both daily shifts at three plants between June 25 and 27.
The following shares also rose or fell. Stock symbols are in brackets after company names.
CJ Corp. (001040 KS), South Korea's biggest grocer, advanced 1,500 won, or 1.3 percent, to 120,500. Daewoo Securities Co. raised its six-month price estimate by 26 percent to 158,000 in a report, citing CJ's decision to split into holding and operating companies.
S-Oil Corp. (010950 KS), South Korea's third-largest oil refiner, climbed 400 won, or 0.5 percent, to 75,100. The company said yesterday it will delay a 3.6 trillion won ($3.8 billion) plan to build a second refining unit because of rising construction costs and land prices.
Shinyoung Securities Co. raised its 12-month price estimate for the shares by 4.8 percent to 88,000 won, in a report. Postponing the plant will keep supply of oil products tight, increasing prices, while the company will have more money left for dividends, wrote Oh Jung Ill, an analyst.
Wooree ETI Co. (082850 KS), which makes parts for liquid- crystal displays, gained 300 won, or 2.7 percent, to 11,550. Korea Investment & Securities Co. lifted its six-month price estimate by 17 percent to 13,500 won, in a report. The company will benefit from a recovery in the LCD industry, wrote Yoo Jong Woo, an analyst.
