Seoul shares wiped out early gains to close lower on Tuesday as drops in regional markets weighed on sentiment, with losses led by key technology and steel issues including Hynix Semiconductor. The Korea Composite Stock Price Index (KOSPI) ended down 1.54 percent at 1,371.84 points.
"Losses in regional markets, particularly Taiwan, weighed on sentiment. Investors seem to be wondering whether gains since March, which had been fuelled by economic hopes and liquidity, justify yet-to-be proved corporate earnings," said Hwang Keum-dan, a market analyst at Samsung Securities.
Mews on Monday that North Korea had sentenced two American journalists to 12 years hard labour, raising the stakes in its confrontation with Washington, had a limited impact on markets. "The incarceration of the US journalists cannot be positive, as it points to some sort of response by the United States...but it is not a key market factor," Hwang added.
Key blue chip stocks retreated, with Samsung Electronics, the largest share on the KOSPI by market cap, falling 1.74 percent, while Hynix Semiconductor, the world's No 2 memory chip maker, lost 5.49 percent. POSCO, the second-largest share on the main index and the world's No 4 steelmaker, declined 2.21 percent.
Shinsegae Co outperformed, edging down 0.9 percent, after the discount retailer and department store operator said total revenue for May rose 20 percent year-on-year to 1.1 trillion won ($875.7 million). Some construction shares rose after the government said it had finalised a plan to spend a combined 22.2 trilion won ($17.79 billion) until 2012 to develop four of the country's major rivers.
"Large construction companies are expected to form a consortium, and will probably evenly win construction orders from the river project," said Dongbu Securities analyst Hong Seo-yeon, in a report on Tuesday. Daewoo Engineering & Construction advanced 1.29 percent and Kyeryong Construction climbed 3.18 percent.
LS Industrial System Co gained 0.77 percent after the electrical power equipment supplier said on Tuesday it would set up a 40 billion won ($32.06 million) semiconductor joint venture with German chipmaker Infineon Technologies AG in August. Foreign investors bought a net 80.8 billion won. Institutions sold a net 376.6 billion won worth of shares and retail investors bought a net 335.6 billion won.
Decliners led advancers 612 to 198, with 76 unchanged. Trading volume stood at 472.8 million shares worth 5.8 trillion won, compared with 508 million shares worth 5.33 trillion won on Monday. The KOSPI 200 June futures index ended 3.05 points lower at 174.25, and the KOSPI 200 spot index fell 2.76 points to 174.91. The junior Kosdaq market ended 2.11 percent lower at 517.96 points.