South Korean shares ease

South Korean shares fell on Monday but remained above the 2,000 point level, as momentum from Friday's Fed-inspired rally slowed without a basic improvement in fundamentals. The Korea Composite Stock Price Index (KOSPI) closed down 0.3 percent at 2,002.35 points, after hitting a five-month high on Friday in reaction to the US Federal Reserve's announcement of a third round of quantitative easing.
"With foreign investors' risk appetites unabated, the wider bullish trend appears to be intact," said Lim Dong-rak, an analyst at Hanyang Securities. "However, it takes time for fundamentals to improve, and the index could not help but take a breather from rapid gains around the 2,000-point barrier."
South Korea's influential government think tank slashed on Monday its 2012 and 2013 economic growth forecasts, calling for more expansionary policy to counter the impact from the protracted euro zone crisis. Asia's fourth-largest economy is now seen growing just 2.5 percent this year after a 3.6 percent rise last year, the Korea Development Institute (KDI) said in a report, a sharp cut from 3.6 percent growth forecast in May.
Still, foreign investors bought a net 503 billion won ($450 million) worth of shares on the KOSPI, while local institutional and retail investors sought profits by selling a combined net 499 billion won worth of shares. Market heavyweight Samsung Electronics snapped a four-day winning streak and closed down 1.6 percent due to profit-taking, analysts said. Local banking stocks remained bullish, with Shinhan Financial Group up 3.2 percent while Hana Financial Group rose 3 percent.
"Improvement of banks' funding conditions has much to do with the bullish investor sentiment, as the won is expected to appreciate while risk premiums shrink," said Kim Soo-hyun, a banking sector analyst at Shinhan Investment Corp. Meanwhile, South Korean general insurance stocks fell across the board, with reports of property damage caused by Typhoon Sanba hitting the Korean peninsula.
Hyundai Marine & Fire Insurance closed down 3.4 percent, while Samsung Fire & Marine Insurance fell 3.5 percent. Telecom shares also declined, with SK Telecom closing down 3.3 percent while KT Corp fell 2.3 percent. Analysts said institutional investors continued to shed telecom stocks since Friday's session as dimmer earnings forecasts coincided with roughly three months of strong stock performance. Gainers outnumbered decliners 458 to 359. The KOSPI 200 benchmark of core stocks closed down 0.4 percent, while the junior KOSDAQ edged 0.03 percent lower.