Views Article – Sharenet Wealth

Asia, Forex

S.Korea stocks shed over 2% as Japan trade spat spirals

* KOSPI index hits lowest since Nov 2016, foreigners net sellers * Korean won drops over 1% vs U.S. dollar * South Korea benchmark bond yield falls By Hayoung Choi SEOUL, Aug 5 (Reuters) – South Korean shares fell more than 2% on Monday as Japan’s decision to drop South Korea from fast-track export status weighed on the market, which has been already battered by fragile corporate earnings. Japan on Friday said it will remove the neighbouring country from a list of countries that enjoy minimum export restrictions from Aug. 28, pushing the benchmark KOSPI down nearly 1%. As of 0242 GMT, the Seoul stock market’s main KOSPI fell 42.16 points or 2.11% to 1,955.97. In early trade, the benchmark index was down as much as 1953.01, marking the lowest since November 2016. “Tension between Seoul and Tokyo has become an all-out war and investors are failing to recover confidence amid a series of weak corporate earnings in the second quarter,” said Byun Juno, head of Eugene Investment & Securities research centre. “Uncertainties over the Japan-Korea dispute make the situation worse. Some global firms may feel reluctant to buy South Korean products if they expect South Korean suppliers will fail to provide goods in time due to Japan’s tighter restrictions,” he added. South Korea on Monday announced plans to invest about 7.8 trillion won ($6.44 billion) in research and development for local materials, parts and equipment over the next seven years in an effort to cut reliance on Japanese imports. However, such measures are expected to take some time to kick in, according to analysts. The junior KOSDAQ also lost more than 4%, hovering around the 590-point mark for the first time since December 2016. As offshore Chinese yuan fell below 7 per dollar, South Korea’s won hit its lowest versus the dollar since March 2016. The won was quoted at 1,212.2 per dollar on the onshore settlement platform , 1.17% lower than its previous close at 1,198.0. Amid greater appetite for safe-haven assets, the currency marked its lowest against the Japanese yen since July 2016. Foreigners were net sellers of 104.7 billion won ($86.39 million) worth of shares on the main board on Monday. Amid a protracted trade war between the United States and China, the KOSPI has fallen 4.07% so far this year, and lost 6.0% in the previous 30 trading sessions. The won has lost 8.0% against the U.S dollar so far this year. In money and debt markets, September futures on three-year treasury bonds rose 0.20 points to 111.17, while the 3-month Certificate of Deposit rate was quoted at 1.50%. The most liquid 3-year Korean treasury bond yield fell by 5.7 basis points to 1.204%, while the benchmark 10-year yield fell by 7.4 basis points to 1.278%. ($1 = 1,211.9000 won) (Reporting by Hayoung Choi; Editing by Shounak Dasgupta)

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