Seoul shares fell 1 percent on Wednesday to mark a second consecutive session in the red as POSCO slumped on worries earnings growth would slow, and amid caution about valuations after a recent record-setting surge.
Also having an impact were renewed worries about the US mortgage sector after Bear Stearns said its two hedge funds that bet heavily on risky subprime loans now have "very little value," and disappointment over earnings results from Intel Corp and Yahoo Inc.
Foreign investors were heavy sellers for a second consecutive session, further taking momentum out of an index that had on Monday come close to breaching the 2,000-point level for the first time.
"It's time to be cautious. The rally has been too fast. People thought the 2,000 points level will be breached soon, but it may not be so easy," said Lim Chang-gue, a fund manager at Samsung Investment Trust Management, citing valuations as potential major concern.
The benchmark Korea Composite Stock Price Index (KOSPI) fell 0.96 percent to 1,930.70 points. The index had hit on Monday its eighth intraday record this month, but ended the session down 0.7 percent as investors worried that the market was overheating after a 37 percent gain this year.
POSCO dropped 5.41 percent to 525,000 won, as earnings growth is seen slowing, while chances of a take-over could be reduced after a unit of Hyundai Heavy Industries Co said it would buy a 1 percent stake.
Hyundai Heavy dropped 2.87 percent to 372,000 won after its unit said it would pay 402 billion won ($438.5 million) for its stake in POSCO, which follows a separate cross-shareholding deal announced between the two firms earlier this year. Among other decliners, LG Chem Ltd, South Korea's biggest chemicals firm, fell 2.16 percent to 86,000 won ahead of its quarterly earnings results due out after the market's close.
Foreign investors sold a net 588.7 billion won in the main bourse, while retail investors bought a net 443.8 billion won. Institutional investors purchased a net 4.2 billion won. Trade volume reached 609 million shares worth 8.3 trillion won compared to 519.5 million shares worth 7.9 trillion won on Monday. Decliners outnumbered gainers by 414 to 387 with 56 titles ending flat. The September KOSPI 200 futures index lost 3 points to 245.80, while the underlying KOSPI 200 spot index shed 2.99 points to 244.92. The junior and tech-heavy Kosdaq market dropped 0.12 percent to finish at 818.92.
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