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Korea stocks end lower on bond ylds, program sales

SEOUL: South Korean stocks ended more than two percent lower on Wednesday as individual investors sold on concerns over rising bond yields and program sales linked to option contracts expiring on Thursday, brokers said.

The Korea Composite Stock Price Index.closed down 26.32 points or 2.68 percent at 955.01.

Overnight declines on the technology-laden Nasdaq also threw cold water on the over-the-counter market Kosdaq.

The Kosdaq was down 14.72 points or 6.07 percent to 227.67 points.

"Investors are getting nervous because the local market lacks any strong driving force," said Kim Young-il, chief fund manager at Mirae Asset Investment Management. Analysts also noted that investors are wary as Seoul's bond yields have risen for the past week.

"Domestic interest rates face upward pressure. One particular problem on this front is that bond yields have been artificially maintained in the one-digit range for the past several months using the Bond Market Stabilisation Fund," said Lee Seung-hoon, vice president at Morgan Stanley Dean Witter in Seoul.

Analysts said that given market uncertainties, investors locked in gains from recent hefty rallies in blue-chip telecom stocks. SK Telecom, the largest mobile telephone service provider, shed 210,000 won or 5.98 percent to 3.3 million won.

Dacom, one of two fixed-line telephone service providers, dropped 53,000 won or 14.93 percent to its daily limit low at 302,000 won.

State-run Korea Telecom dropped 8,500 won or 6.07 percent to 131,500. Analysts said institutional investors unloaded blue-chip telecom stocks via programme sales, with option contracts due to expire on Thursday.

"The market estimates as much as 1.4 trillion won worth of shares would be unloaded tommorrow, when the option contracts expire," said Park Hyo-jin, an analyst at Shinhan Securities.

"It's uncertain how much the market is going to absorb."

The key factor offsetting the telecom sell-off is the expected good performance of small-cap stocks this year following their sparkling record in 1999.

Foreign investors, in particular, snapped up Lotte Confectionery Co, which saw the biggest net gain.

Lotte Confectionery closed up 15,000 won or 10 percent to 165,000.

Sugar and flour maker Cheil Jedang, which has a 25 percent stake in Internet networking company, Dreamline Corp closed up 4,500 won or 4.74 percent to 99,500.

"Investors like Cheil since the company not only has a healthy balance sheet but also has a stake in an Internet concern," said Shin Hee-young, an analyst at Hyundai Securities. In the broader market, trade volume totalled 227.08 million shares, compared to Tuesday's total of 257.07 million shares.

Trade was valued at 3.35 trillion won compared to 4.24 trillion won on Tuesday.

Foreign investors bought a net 163.02 billion won worth of shares.

Individual investors sold a net 166.94 billion won worth of shares.

Institutional investors turned net sellers with 14.83 billion won worth, though investment trust companies separately sold a net 29 billion won.

Decliners outpaced advancing issues 631 to 226 with 31 shares unchanged.

The March futures on the 200 index: closed down 2.8 points at 121.6, while the underlying spot index .ended down 3.3 points at 119.81.

Analysts said the expect the market to maintain a negative bias for the rest of the week as the market remains pressured by program sales.-Reuters