Seoul shares dropped 0.1 percent on Tuesday, erasing gains after earlier edging up to their fifth consecutive record, as LG.Philips LCD and other blue chips reporting earnings results this week fell.
LG.Philips posted a smaller-than-expected quarterly loss, with the flat-panel maker saying it aimed to break even in the second quarter and predicting margins on earnings before interest, tax, depreciation and amortisation would improve to the low 20s percent from 19 percent in the first. Shares in the flat-panel maker had fallen 1.97 percent to 32,400 won ahead of the results, which came after the market's close.
Recent record-setting shares such as Hyundai Heavy Industries Co also fell as investors locked in profits, but LG Electronics Inc gained after Lehman Brothers raised the stock to overweight. Trading volumes in the KOSPI were still strong on Tuesday, staying at their highest level since April 2006.
"The recent pace of gains has been quite strong, and that creates some caution about how far the markets can gain, especially after the 1,500-point level was breached," said Kim Joon-kie, an analyst at SK Securities.
The benchmark Korea Composite Stock Price Index (KOSPI) fell 0.13 percent to 1,499.16 points, retreating from a record 1,502.34 points hit early in the session, which was its fifth consecutive record in as many sessions. The main index's relative strength index (RSI) rose to 82.9 points in the previous session, above the 70-point level at which a share or index tends to be seen as technically overbought. The KOSPI's RSI fell to 80.1 on Tuesday.
The KOSPI has weathered a volatile 2007, including a 5.2 percent drop in January and periods of instability such as in late February when global market slumped.
The index is still up 4.5 percent for the year, greater than its 4 percent gain for the whole of 2006. This year's rally was led by sectors expected to outperform, including shipbuilders such as Hyundai Heavy Industries Co and steel makers such as POSCO Co Ltd.
Foreign investors have also been key, buying around a net 1.31 trillion won ($1.41 billion) in shares in the KOSPI so far in 2007, compared with net sales totalling about $11.5 billion last year when they preferred higher returns in hot markets such as India. POSCO fell 1.14 percent to 389,500 won ahead of its earnings due out on Thursday. The steel maker is set to report a 30 percent jump in first-quarter profit driven by a series of stainless steel price increases.
Samsung Electronics Co Ltd fell 1.03 percent to 578,000 won ahead of its earnings out on Friday. Although the chip maker is seen posting a weak first quarter, investors are hoping a recovery in memory chip prices will boost profits by the second half of the year.
Investors also locked in gains, with Hyundai Heavy Industries falling 0.93 percent to 214,000 won after its record 219,000 won on Monday. The shipbuilder had surged 71.4 percent this year as of the previous day.
But among gainers, LG Electronics rose 1.1 percent to 64,100 won after Lehman Brothers raised its stock to overweight from equal-weight, citing improving profits in the home appliance and mobile phone divisions.
LG Petrochemical Co Ltd gained 1.12 percent to 27,000 won after Merrill Lynch said the shares were oversold and that "it's time to get back in." Shares in the petrochemicals maker had fallen 9.5 percent since the beginning of February to Monday's close.
South Korea's junior and tech-heavy Kosdaq market rose 0.58 percent to finish at 674.41, marking its ninth consecutive session of gains and its highest close since ending at 675.30 on May 15, 2006. Foreign investors bought a net 120.8 billion won in shares on the main bourse, while retail investors bought a net 228.2 billion won, according to data at 0638 GMT. But institutional investors sold a net 295.6 billion won.
Trade volume reached 357.3 million shares worth 4 trillion won, compared to 388.2 million shares worth 4.2 trillion won on Monday. Gainers trumped decliners by 402 to 372 with 76 titles ending flat. The June KOSPI 200 futures index rose 0.10 point to 195.10, but the underlying KOSPI 200 spot index fell 0.30 point to 193.55.
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