Seoul shares retreated from an early high to end up slightly on Tuesday, as initial strong reaction to a Wall Street surge faded across Asia, while defence issues jumped on news of a naval clash between two Koreas. Most heavyweights gave up early gains, with recently oversold stocks such as Hyundai Motor and Hana Financial Group maintaining advances.
"The market initially rose on US markets' gains, but the reaction lost steam not only in Korea but in other Asian exchanges. The G20 comments, depending on the point of view, underscore the fragile state of the global economic recovery," said Kim Seung-han, an analyst at HI Investment & Securities. "The naval clash news didn't help either, although overall sentiment was not hurt much."
The North and South Korean navies clashed briefly in the Yellow Sea on Tuesday, just ahead of US President Barack Obama's Asia visit this week. The incident had a limited impact on both the local equities and foreign exchange market. The Korea Composite Stock Price Index rose 0.35 percent to end at 1,582.30, after briefly trying the 1,600 mark early in the morning.
A pledge by the Group of 20 to keep economic stimulus in place raised expectations for prolonged low interest rates. The market expects the Bank of Korea to almost certainly keep interest rates on hold for a ninth straight month at Thursday's policy meeting. Hyundai Motor rose 2.44 percent and Hana Financial climbed 3.15 percent. Korean Air ended up 1.31 percent after positing its second straight quarterly net profit and expecting a further recovery next year.
Defence companies surged on the news of the two Koreas' skirmish, with Huneed Technologies jumping 8.67 percent and Victek up 5.22 percent. But companies that rely on inter-Korea ties, such as those in electric power co-operation initiatives with the North or with production sites in the joint North-South Kaesong industrial park, suffered. Seondo Electric dropped 6.93 percent and Kwang Myung Electric slipped 5.03 percent.
Samsung Electronics, the world's largest memory chip maker, trimmed gains to finish 0.41 percent higher, helped by strength in chip contract prices and rises in US peers. Samsung, also the world's top LCD TV maker, said it saw no impact on sales from a US trade body ruling that it should no longer sell some LCD devices in the United States. Doosan Heavy Industries rose 2.17 percent on news that it won a 158.5 billion won ($136.8 million) order for a highway in Vietnam.