Seoul shares backed off a six-month intraday high to end flat on Monday as chip makers rose after Samsung Electronics gave an optimistic outlook, but shipbuilders plunged on worries about the future prices of new vessels.
Ssangyong Motor Co and Hanjin Shipping Co also fell following weak third-quarter results that came after Friday's close, although fuel-dependent firms such as Korean Air Co gained after oil prices eased.
The benchmark Korea Composite Stock Price Index (KOSPI) rose 0.07 percent to 1,396.69, having swung between gains and losses throughout the session. The index hit a session high of 1,399.98 points shortly after the market's open, just below the key psychological 1,400-point level and the KOSPI's highest intraday point since May 17, but was unable to hold on to the gains.
Analysts see technology shares supporting the KOSPI in the short term, although the recent pattern of outperformers attracting sellers is likely to continue. "IT share prices still have an upside potential of 10 to 15 percent. The main driver for shares will be that after the recent correction in the sector, some people see them as a bit undervalued," said Chung Kyun-sik, chief investment officer of Yuris Investment Advisory with $500 million under management.
"What we are seeing a lot these days is people switching out of sectors that have gained a lot this year and into others that have not done as well," he added. Chip makers gained after Samsung Electronics Co Ltd forecast "very strong" demand for computer memory chips for the first quarter of 2007 due to the January launch of Microsoft's new Vista operating system.
Shares in the world's biggest maker of memory chips gained 1.59 percent to 639,000 won, while Hynix Semiconductor Inc gained 2.63 percent to 35,100 won, Samsung, additionally the world's biggest maker of large liquid crystal displays so far this year, also forecast its flat panel business would likely perform better than expected in the fourth quarter.
Carrier Korean Air rose 1.05 percent to 33,750 won as oil prices stayed below $60 a barrel after the International Energy Agency last week said global inventories rose more than expected. State-run power provider Korea Electric Power Corp gained 0.4 percent to 37,250 won. But shipbuilding shares dropped on reports that a speaker at a conference organised by UK shipping register Lloyd's last week said prices for new ships could drop by 20 to 30 percent over the next five years.
Hyundai Heavy Industries Co Ltd slid 5.69 percent to 132,500 won, marking its biggest one-day percentage fall since June 8. Shares in the world's biggest shipbuilder have quadrupled in value since 2005. Among other decliners, shipping firm Hanjin Shipping fell 1.78 percent to 24,800 won after posting on Friday a drop in quarterly net profit. Shares were also hit after Hanjin said on Friday it and shipper Korea Line would swap shareholdings, a move investors believe will ward off foreign predators.
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