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Korean stocks end lower on rate concerns after Fed

SEOUL: South Korean stocks marched to a

two percent rise in early trade on Friday only to slink back into

negative territory as institutional and individual investors took

profits on fears that an expected US interest rate hike could

push rates higher here, analysts said. The Korea Composite Stock Price Index closed

down or 3.02 points or 0.32 percent at 948.03. On the week, the KOSPI fell 0.62 point or 0.06 percent after

closing at 948.65 points on January 7. Despite overnight gains on the technology-laden Nasdaq

index, Seoul's over-the-counter Kosdaq market

plunged. The Kosdaq was down 9.02 points or 4.25 percent to 203.22

points.

US Federal Reserve Board Chairman Alan Greenspan made clear

in a speech in the morning that higher short-term official US

interest rates are imminent. "What Greenspan said was expected and is to a large extent

reflected in the market. But it had a psychological impact on

some investors in a weak market," said Ken Lee, head of research

at Good Morning Securities. Analysts said some investors are growing increasingly

concerned that local interest rates will have rise along with the

U.S rates despite Seoul's intent to maintain single-digit

interest rates. South Korea's three-year treasury bond yields have risen

steadily since the beginning of the year and have closed in on

double-digit territory on concerns that the central bank may

raise the overnight call rate, currently around 4.60 percent, to

fight inflation. Dacom, a telecom company offering services that

include fixed-line telephone services, saw the biggest net drop. Dacom dropped 21,000 won or 7.24 percent to 269,000 won. Bohae Brewery, a maker of Korea's popular 'soju'

alcohol drink, saw its preferred shares, which were bought

earlier in the week, end down 8,500 won or 10.43 at 52,200. Samsung Electronics, one of the world's largest

manufacturers of dynamic random access memory chips, or DRAMs,

benefitted after Intel Corp announced strong fourth

quarter earnings overnight. "Samsung's shares are undervalued and Intel's announcement

gave an added boost Samsung needed," said Han Ilsuk, a senior

analyst at Hyundai Securities. Samsung Electronics gained 6,000 won or 2.10 percent to

291,500 won. The Kosdaq OTC market lost more than 10 percent this week. "Kosdaq is now at a point where it's now immune to

record-breaking jumps on Nasdaq," said Paulo Rhee, deputy head of

research at HSBC Securities. "It will take a lot of time for

Kosdaq to recoup." Individual investors make up 90 percent of Kosdaq's players

and this week they were in a conservative mood, analysts said. Handysoft, a software developer, dropped 65,000

won or 11.97 percent to its daily limit low at 478,000 won. Serome Tech, an Internet contents and software

developer, also hit its limit low, shedding 21,000 won or 11.93

percent to 155,000 won. In the broader market, trade volume totalled 224.96 million

shares, compared to Thursday's total of 223 million shares. Trade was valued at 3.44 trillion won compared to 3.35

trillion won on Thursday. Individual investors sold a net 167.3 billion won worth of

shares while institutional investors sold a net 7 billion won

worth, though investment trust companies separately were net

buyers of 76.1 billion won worth. Foreign investors bought a net 176.4 billion won worth of

shares. Decliners outpaced advancing issues 457 to 376 with 59 shares

unchanged. The March futures on the KOSPI: closed down 2.8

points at 120.7, while the underlying spot index ended

down 0.27 point at 118.95. Next week, analysts said they expect the KOSPI's up-and-down

volatility to continue. "Market movements will mostly be short-lived until the market

sees a strong positive indicator that will convince investors

they are safe," said Good Morning Securities' Lee. Analysts said the market's daily fluctuations this year have

made investors especially risk-adverse and therefore prone to

react to downside market indicators. One such concern is the government's plan on February 8 to

raise a ceiling on redemption of beneficiary certificates linked

to uncollateralised Daewoo-issued bonds from 80 to 95 percent.-Reuters