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Seoul shares jumped 2.6 percent to a record closing high on Tuesday as financials rallied on receding worries about credit market turmoil, while resource stocks such as Korea Zinc soared on strong metal prices.
KOSPI closed just shy of the 2,015.48-point lifetime high reached on July 26, buoyed by the summit between the leaders of South and North Korea, only the second since the 1950-53 war ended in armistice rather than a full peace treaty.
Hyundai Engineering & Construction jumped 5.8 percent as investors bet its ongoing construction projects in North Korea would gather traction, while bullish resources prices boosted firms such as steelmaker POSCO.
But analysts cautioned the market, which has now fully recouped the losses since mid-August when global markets were hit by credit worries, might be running ahead of it and any further gains would be slow and limited.
"The summit came on top of last night's strong showing in Wall Street, somewhat contributing to bolstering investment sentiment," said Cho Hee-yeon, deputy general manager at Korea Investment & Securities' asset management team. "The consensus is that the market is headed for upside, after weathering the credit storm in the past two months, but I didn't expect it to rise this fast."
The benchmark Korea Composite Stock Price Index closed 2.62 percent up at 2,014.09, notching an all-time closing high and marking its biggest daily gain since September 19. The main index has now gained more than a fifth since mid-August, when global markets were hurt by worries about credit conditions, and is up 40 percent for the year.
Foreign investors turned net buyers on Seoul's main bourse after selling for seven consecutive sessions, taking up a net 620 billion won ($678.7 million) worth of shares. Market players took heart from a surge in US stocks on Monday, which saw the Dow rallying to a record close on the first day of the fourth quarter.
Banks gained in line with global peers, after three banks including Citicorp Inc detailed expected losses from the crisis, raising hopes banks are drawing a definitive line under losses from the supreme mortgage crisis and other risky loans.
Kokomo Bank, South Korea's top lender, jumped 3.95 percent to 81,600 won, and second-ranked Shinpan Financial Group advanced 4.26 percent to 63,600 won. Brokerages such as Samsung Sec rose as investors bet fund inflows into stock markets would accelerate, after the market proved its resilience in the face of the global credit squeeze and on growing expectations the worst of the crisis may be over.
Samsung Securities gained 1.22 percent to 91,000 won and Daiwa Securities ended 3.48 percent higher at 29,700 won. Shares in Hyundai Engineering & Construction jumped 5.79 percent to 95,000 won a day after the builder announced a $1.36 billion order to build two power plants in Libya.
Analysts said the stock was also benefiting from the summit between South and North Korea which kicked off on Tuesday, as Hyundai, currently involved in several construction projects in the communist state, would likely be the main contractor for any further projects in North Korea resulting from the meeting.

Copyright Reuters, 2007

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