An electric panel displays the Korea Composite Stock Price Index (Kospi) Monday in a trading room at Hana Bank’s Seoul headquarters. (Yonhap)
South Korean stocks rose on Monday, ending a three-day losing streak. Construction and technology companies led the rally as the government’s 50 trillion won ($35 billion) liquidity support plan eased concerns about rising credit crunch risks. The local currency ended almost unchanged against the US dollar.
The benchmark Korea Composite Stock Price Index rose 23.04 points, or 1.04 percent, to close at 2,236.16. Trading volume was moderate at 434 million shares worth 6.76 trillion won, with winners outnumbering losers 622-246.
On Sunday, tax authorities said they will expand liquidity injection programs to at least 50 trillion won to calm the corporate bond market, which has been unsettled by the non-payment of debt by an amusement park developer in Gangwon province.
The failure to repay 205 billion won in debt has rocked the market as many institutional investors bought the asset-backed commercial paper issued by developer Gangwon Jungdo Development, which is 44 percent owned by the province.
It has also raised concerns about the negative impact on the real estate project finance sector.
Analysts said recent comments from Fed officials about the need to slow the pace of rate hikes also boosted investor sentiment.
Mary Daly, President of the San Francisco Federal Reserve Bank, suggested that monetary tightening should be “tapped” to bring down inflation that has been high for decades.
Chicago Federal Reserve Bank President Charles Evans also said rate hikes should be suspended at just over 4.5 percent.
“Your comments are reasonable given the growing risks of recession. But any kind of dovish signals would only work in the short term, even if the Fed says it will slow rate hikes from December,” said Noh Dong-kil, an analyst at Shinhan Investment & Securities Co.
“To see an uptrend in stocks, we need confirmation that core inflation has peaked,” Noh said.
The market is broadly forecasting another 0.75 percentage point rate hike by the Fed in December.
The plan to expand liquidity support boosted construction companies in Seoul, with Hyundai Engineering & Construction up 2.3 percent to 34,950 won and GS Engineering & Construction up 3.5 percent to 22,450 won.
Top-cap Samsung Electronics closed down 2.86 percent at 57,500 won.
Battery materials maker Posco Chemical rose 4 percent to 194,500 won after reporting its biggest-ever quarterly operating profit for the third quarter.
In contrast, top automaker Hyundai Motor slumped 3.3 percent after reporting a fall in net profit in the third quarter, driven by massive provisions for after-sales services related to the Theta II engine.
The local currency closed at 1,439.70 won against the US dollar, up 0.1 won from Friday’s close. (Yonhap)