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S Korea's benchmark index seen weaker

SEOUL: Weakness on Wall Street and the struggling yen are likely to trap South Korea's benchmark index in a narrow range with a bias on the downside this week, analysts said.

But they said steady fund inflows would give a boost to the Kosdaq market.

"The plunge on Wall Street is likely to throw cold water on the already battered main market in the early part of the week," said Yoon Sam-wi, a strategist at LG Securities.

The Dow Jones industrial average shed 295.05 points or 2.81 percent to 10,219.52 points on Friday, after Federal Reserve Chairman Alan Greenspan's warned that U.S. interest rates will probably continue to go up.

The tech-laden Nasdaq Composite index closed down 137.18 points or 3.02 percent at 4,411.74 points.

But analysts said high-technology shares and biochips are certain to fare well with top mobile phone service provider SK Telecom hit by futures-linked sales on Friday -- expected to attempt a rebound.

The Korea Composite Stock Price Index closed at 879.14 on Friday, down 18,38 points or 2.05 percent right after peaking at 918.04 points as a heavy bout of futures-linked arbitrage sales emerged towards the close of trade.

It lost 7.8 percent on the week.

Further depressing the main market is the departure of investors for the over-the-counter market, analysts said.

"Both domestic and foreign investors are increasingly willing to participate in the Kosdaq market, keeping up a recent trend that has sapped volume on the main board," LG's Yoon said.

Analysts said an investor relation session by Kosdaq-listed firms for foreign investors on Monday would fan interest in the Kosdaq market.

"The event would add fuel to investor interest in the over-the-counter market hoisting volume and turnover in Kosdaq even higher," said Seo Hong-suk, a strategist at Daishin Securities.

The yen's weakness JPY versus the dollar has shaken investor confidence in earnings prospects for Korea's top exporters, analysts said.

"The weak yen poses threat to Korea's exports, the engine of the country's economic recovery given the won's persistent rises," Seo said.

Korean firms compete head-to-head with Japanese counterparts on many areas such as shipbuilding and steel.

Analysts said the weakening trade balance was also hitting confidence.

South Korea posted $1.39 billion trade deficit for the first 15 days of February, after recording its first monthly trade deficit of $400 million in 27 months in January.

The Japanese yen closed at a five month-low of 110.92 to the dollar on Friday in New York, while the Korean won closed the day at 1,129.0.

Analysts expect KOSPI to move in a limited range of 850-910 points this week.-Reuters