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Election to cloud S.Korean stock market

SEOUL: Uncertainties linked to the April 13 general election and the expiration of many investment funds will likely dampen buying sentiment this week on the South Korean stock market, analysts and fund managers said.

"Generally in the past, the market turned weak before elections," said Choi Nam-chul, chief fund manager at Hyundai Investment Trust Management Co.

"With investment trust companies faced with redemptions and having a difficult time launching new funds, it won't be an overstatement to say that the movement of the market lies in the hands of foreign investors."

Hyundai manages some 700 funds worth a combined 11.5 trillion won ($10.4 billion) and some 200 of these funds were due to expire between March and May.

Lee Byung-oan of Hyundai's equity management team said the company saw about 800 billion won in redemptions from investors in March, which he said was less than expected. But he declined to give the size of the 200 funds.

"We are having difficulties in selling equities-linked beneficiary certificates to launch new funds," said Lee, adding that it had launched two new equity funds.

The Korea Composite Stock Price Index (Kospi) closed last week at 860.94 points on Friday, down 3.26 percent on the day and down 3.18 percent for the week.

Analysts expect foreign investors to be quiet this week on concerns that the government will tighten monetary policy after the election.

"There's no immediate threat to the market. It's a mid- to long-term concern," said Kim Jeong-hwan, a market strategist at LG Investment and Securities.

Analysts and fund managers say investors expect the government to actively start restructuring the financial sector after the April election.

Specifically, they expect healthy commercial banks to merge with less healthy ones.

If foreign investors remain vigilant, that could mean bad news for local semiconductor stocks, which have been the key sector that has been moving the Kospi of late.

Samsung Electronics Co 0593, the world's largest memory chip maker and which accounts for 14 percent of the Kospi's capitalisation, is likely to drop.

It fell 4.96 percent on Friday.

Analysts forecast the Kospi to move in a boxed range of 860 to 890 this week.

They said the downside bias on the Kosdaq over-the-counter market would continue this week with an inflow of rights issues and new listings.

Also contributing to the downside is the recent global sell-off of technology stocks.

"If investors continue to dodge high-tech stocks, the Kosdaq market could go below 200 points this week," said Hyun Jong-won, an analyst at Good Morning Securities.

The Kosdaq market closed at 221.27 points on Friday, down 2.13 percent on the day and down 4.9 percent on the week.-Reuters