Seoul shares drop on doubts over US rescue plan

(ATTN: ADDS bond yields at bottom)

SEOUL, Sept. 29 (Yonhap) -- South Korean shares fell on Monday as investors got skittish on doubts over the impact of the U.S. financial bail-out plan and a weaker won, analysts said. The local currency fell sharply against the U.S. dollar.

The benchmark Korea Composite Stock Price Index (KOSPI) fell 19.97 points, or
1.35 percent, to 1,456.36. Volume was thin at 344.17 million shares worth 4.9
trillion won (US$4.13 billion), with losers outpacing gainers 518 to 273.
"The biggest U.S. bail-out plan in history to purchase distressed debts failed to
enliven investors confidence over the local financial market," said Kim
Seung-han, an analyst at CJ Investment and Securities Co. "Investors will wait
and see how the rescue will work on the local economy, where a falling won is
aggravating sentiment," Kim said.
U.S. lawmakers are prepared to vote on Monday (local time) on the government's
US$700 billion proposal to buy home mortgage-related assets in a bid to rescue
the teetering financial sector after congressional leaders reached a tentative
deal early Sunday.
The won fell sharply against the U.S. dollar, despite a currency official's
verbal intervention. The local currency finished at 1,188.8 won to the dollar,
down 28.3 won from Friday's close.
The passage of the U.S. bail-out plan sent the dollar further upward while
pushing the won down, dealers said.
Choi Jong-ku, the finance ministry's international financial division, said that
growing volatility in the local currency market is "excessive," and South Korea
will take necessary actions to stabilize it.
South Korea's Finance Ministry said Friday that it will inject at least $10
billion into the local won-dollar swap market in an effort to calm the turmoil
and provide added liquidity.
Dealers suspect the swap market intervention, however, will limit the
government's capacity to intervene in the currency market.
Steelmakers and shipbuilders were the biggest drags on the market. Top steelmaker
POSCO fell 1.84 percent to 454,000 won. Top ship-builder Hyundai Heavy Industries
lost 3.73 percent to 271,000 won and Hanjin Heavy Industries & Construction
tumbled 8.27 percent to 33,850 won.
Most large-cap shares traded sharply lower, with market leader Samsung
Electronics falling 1.63 percent to 544,000 won. Home-appliance maker LG
Electronics shed 2.3 percent to end at 106,000 won.
Hanwha, meanwhile, gained 1.4 percent to 43,350 won on a report that state-run
Korea Deposit Insurance Corp. plans to sell its 16-percent stake in Korea Life
Insurance Co. to Hanwha Group. The possible stake transfer would raise Hanwha's
stake in Korea Life to 67 percent, giving the nation's conglomerate full control
of the insurer.
Telecom shares also managed to stay in positive terrain. Dominant carrier SK
Telecom gained 3.19 percent to 210,000 won and KTF jumped 3.65 percent to 29,850
won.
Bond prices, which move inversely to yields, rose slightly. The return on
three-year Treasuries fell 0.03 percentage point to 5.98 percent and the
benchmark yield on five-year government bonds also shed 0.03 percentage point to
6.01 percent.