Seoul shares dropped 3 percent on Tuesday, led by auto companies and chipmaker Hynix as investors locked in recent gains on grim earnings outlooks, but SK Telecom and insurers shined on dividend expectations. Hynix Semiconductor came under heavy pressure after rival Powerchip in Taiwan said it had deepened its previous output cuts and applied for government assistance.
Concerns about carmakers intensified after the world's biggest automaker Toyota forecast its first ever group operating loss. Shares of Hyundai Motor and Kia Motors posted their sharpest daily losses in almost a month. "From the perspective of foreign exchange rates, the credit crisis has been winding down," said a senior fund manager of Yurie Asset Management, who declined to be identified because he was not authorised to speak to media.
"But in terms of corporate earnings, there is limited upside momentum as 2009 first quarter EPS (earnings per share) are likely to worsen." The Korea Composite Stock Price Index shed 2.99 percent to close at 1,144.31 points, off a session low of 1,140.13 that marked a 1-week trough.
The benchmark KOSPI is heading for one of its worst yearly performances ever, shedding 40 percent on the year to date. Hynix declined 6.2 percent, trimming losses ahead of a shareholder announcement on fresh funding for the world's No 2 memory chip maker.
J.P. Morgan forecast a 1.3 trillion won ($972.3 million) net loss in the fourth quarter due to sluggish chip shipments and foreign currency-related losses, cutting its target price by 20 percent. Kia Motors plunged near its daily limit of 15 percent, and its affiliate Hyundai Motor closed at its session low, down 10.4 percent. The drops in both stocks were the largest since November 24.
"Toyota's forecast of a loss was a shock. If it's in that situation, it is needless to say Hyundai and Kia have a poor outlook," said Choo Hee-yeop, Korea Investment & Securities strategist. Meanwhile, the governor of the regulatory Financial Supervisory Service, Kim Jong-chang, told a briefing that South Korean chipmakers and auto companies were not in a serious enough situation to require forced restructuring.
Among banking stocks, third-ranked Woori Finance Holdings dropped 5.8 percent. Domestic banks have been under pressure to raise lending to smaller companies, which stoked worries about an deterioration in asset quality going forward. Data showed the delinquency ratio on bank loans owed by smaller South Korean companies climbed to its highest in 2-1/2 years in November. Bucking the trend, stocks with stable earnings structures rose on expectations for dividend payouts.
Trade volume stood at 433 million shares worth 4.1 trillion won, compared with 434.1 million shares for 4.6 trillion won on Monday. Decliners more than trebled advancers by 630 to 205, with 51 titles unchanged. The KOSPI 200 March futures index lost 4.85 points to 148.50 points and the KOSPI 200 spot index shed 5.05 points to 148.93 points. The junior Kosdaq ended down 2.1 percent at 338.76 points.
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