Seoul shares fell on Monday but KT Corp remained a bright spot on merger talk during a session dogged by renewed economic and earnings worries ahead of results season and following grim US job data on Friday. The Korea Composite Stock Price Index ended down 2.05 percent at 1,156.75 points, falling for a third straight session and down nearly 6 percent since January 7.
But the index is still up nearly 3 percent on the year. "First off, earlier rate cut expectations evaporated following Friday's Bank of Korea rate cut decision, which came out to be rather smaller than the 75 basis points some had hoped for. Focus has now shifted back to the macroeconomic fundamentals as earnings season approaches," said Park Sun-wook, a market analyst at Korea Investment & Securities.
"As it turns out, foreign investors, who had fuelled the rally earlier this year, are no longer buying as the earnings outlook continues to weaken," Park added. Foreign investors sold a net 104.6 billion won, selling for a third session following six consecutive buying sessions that ended with the KOSPI at a 3-month high on January 7. Analysts also said poor US job data and continuing negative corporate news flow were weighing on sentiment on Monday.
The US unemployment rate surged to the highest in nearly 16 years last month as deepening yearlong recession forced companies to axe swathes of jobs, government data showed on Friday. Meanwhile on the domestic corporate front Ssangyong Motor, South Korea's No 5 automaker, on Friday sought court protection from bankruptcy.
But shares in KT Corp rose after a local media report on Sunday that South Korea's top fixed-line and broadband provider plans to seek approval for a long-anticipated merger with its mobile service unit KTF Co Ltd. "Reports pointed to a potentially faster-than-expected merger between the two.
Certainly there will be other obstacles to this potential merger, but there are expectations of restructuring of the two, that they both could become slimmer and more efficient," said Park Jong-su, an analyst at Hanwha Securities. KT rose 4 percent and KTF ended mere 0.34 percent lower.
Meanwhile shares in Hanwha Corp outperformed against the benchmark on a strengthening view that the South Korean chemical-to-financial conglomerate may call off its offer to buy Daewoo Shipbuilding. Local media reported on Monday that Hanwha saw Daewoo Shipbuilding's price at 4 trillion won.
"There is talk going around in markets that Hanwha may indeed walk away from the deal, as it is having difficulties raising money to pay the price that was asked," said Kim Jang-hwan, an analyst at Eugene Investment & Securities. "Market consensus is that around 6.5 trillion was asked, which many market participants think is above the reasonable price," Kim added.
LG Display also outperformed, finishing 0.84 percent lower, after the company said it had signed a deal to supply liquid crystal display (LCD) panels to Apple Inc for five years. But industrials including steelmakers retreated as their earnings outlook continued to deteriorate. POSCO went down 3.04 percent and Dongkuk Steel slid 8.79 percent.
Institutions sold a net 104.3 billion won and retail investors bought a net 208 billion won. Decliners led advancers by 654 to 181, with 53 titles ending unchanged. Trading volume stood at 348 million shares worth 3.85 trillion won, compared with 438 million shares worth 5.25 trillion won on Friday. The KOSPI 200 March futures index fell 3.85 points to 151.40 points and the KOSPI 200 spot index lost 3.16 points to 151.01 points. The junior Kosdaq declined 1.99 percent to close at 351.35 points.