Seoul shares retreated on Wednesday as key exporters including LG Electronics fell following big gains in recent weeks, while commodities issues such as Korea Zinc rose on commodity price gains. The Korea Composite Stock Price Index (KOSPI) finished down 0.74 percent at 1,607.77 points.
"Markets were volatile today as options and futures expiry approach tomorrow, and shares are taking a brief breather given the main index's current level following steep gains," said Kwak Joong-bo, a market analyst at Hana Daetoo Securities. "Comments by the Bank of Korea after the interest rate meeting will be followed, but the rate itself is widely expected to be held steady," having a limited impact on stocks, Kwak said.
The 20-day Relative Strength Index (RSI) of the main KOSPI index stood at 60, near the overbought mark of 57, while its 30-day moving average was 1,575 points. Shares in LG Electronics fell after a negative note from Nomura and market talk that the world's No 3 handset maker's August operating earnings might fall short of expectations, according to Lee Sung-joon, an analyst at SK Securities.
An LG Electronics spokeswoman told Reuters the company had no comment on the speculation since it had not disclosed its monthly earnings figures. Nomura in a report dated September 8 lowered the target price on LG Electronics by 5 percent to 171,000 won. "Previously, we had expected LG Electronics to post strong earnings in the fourth quarter despite typical weak seasonality.
However, we now expect weaker fourth quarter earnings and revise down our operating profit estimate by 37 percent," Nomura said in a note distributed late on Tuesday. LG Electronics tumbled 7.96 percent to 133,000 won. Automakers and related issues also fell following big gains in recent weeks, as foreign investors and domestic investment managers moved to lock in profits, analysts said.
Hyundai Motor declined 5.78 percent and Kia Motors lost 6.21 percent. Hyundai Motor and its China partner will start building their third plant in China early next year as its sales in the fastest growing major auto market may soon outpace existing capacity, a company executive said on Wednesday. But shares in Korea Zinc, the world's No 2 zinc refiner, rallied 7.1 percent amid rising zinc and other metal prices.
"Prices of gold and other metals have been gaining lately, and they are fuelling Korea Zinc, which in addition to refining zinc, produces other metal products," said Kim Jung-wook, an analyst at Hana Daetoo Securities. Shares in Hanwha Corp, the flagship unit of Hanwha Group, tumbled 8.49 percent following a local media report that Hanwha Group may seek to buy Daewoo Engineering & Construction.
A Hamwha Group spokesman denied the report, adding that the group was not currently looking at merger and acquisition deals. Shares in Daewoo Engineering ended up 0.36 percent.