Seoul stocks fell 0.6 percent on Friday, unsettled after Pakistani opposition leader Benazir Bhutto was assassinated, but logged a 32 percent gain for 2007, backed by a recovery in Asia's fourth-largest economy.
Despite the global credit crunch that has sent shockwaves through stock markets near the end of the year, Seoul's main index slipped just 2.5 percent in the fourth quarter, thanks to strong retail interest in equities investment products.
While lingering worries about the US subprime mortgage crisis could keep the market jittery early next year, investors are increasingly betting South Korea's new pro-market government and its widely expected financial deregulation measures will breathe fresh momentum into stocks, analysts said.
"The US economy will likely hit bottom sometime in the first half of next year before improving in the second half, so the markets are expected to show a similar trend, gaining upward momentum," said Samuel So, an analyst at Samsung Securities.
"China plays, such as steel makers and shipbuilders, strongly rallied this year, but next year's top gainers are likely to feature tech titles and auto makers that had been ignored throughout the year but whose earnings momentum is expected to pick up."
The Korea Composite Stock Price Index (KOSPI) fell 0.6 percent to 1,897.13 points on the last trading day of 2007.
The index's 32 percent gain for the year, which compares with a just 4 percent rise in 2006, makes South Korea the third-best performing major market in Asia, after China and Hong Kong.
Seoul's financial markets will be closed on Monday and reopen on January 2. Financials such as Kookmin Bank tracked global peers lower after a Goldman Sachs analyst said Citigroup Inc, Merrill Lynch and J.P. Morgan Chase & Co may face larger fourth-quarter debt write-offs than previously expected.
The assassination in Pakistan hurt investment sentiment in global markets, already soured by a weak US durable goods report and talk of more subprime mortgage-related write-downs by financial services companies. Top lender Kookmin Bank slipped 1.15 percent to 69,000 won and fourth-ranked Hana Financial Group dropped 1.56 percent to 50,400 won.
But expectations the market's bull run would continue well into 2008 boosted brokerages, with Hyundai Securities Co rising 3.6 percent to 23,000 won and Daewoo Securities Co advancing 2.51 percent to 30,600 won.
Shares in insurers rose for a second straight session, a day after South Korea's Finance Ministry announced a set of deregulation proposals to help insurance companies grow in scale in the world's seventh-largest by premiums. Hyundai Marine & Fire added 2.2 percent to 25,550 won, and LIG Non-life Insurance jumped 3.93 percent to 23,800 won.
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