Seoul shares tumble on U.S. bailout plan rejection

SEOUL, Sept. 30 (Yonhap) -- South Korean stocks plunged late Tuesday morning as
investors were spooked by U.S. lawmakers' rejection of a government proposal to
rescue the teetering financial sector, analysts said.
The benchmark Korea Composite Stock Price Index (KOSPI) declined 42.23 points, or
2.9 percent, to 1,414.13 as of 11:20 a.m.
"An unexpected rejection of the bail-out plan severely hurt investor sentiment,
sending the KOSPI below the 1,400-mark at one point. But the key stock index
pared some losses as retail and institutional investors hunted for bargains,"
said Lee Sun-yup, an analyst at Goodmorning Shinhan Securities Co.
The KOSPI tumbled 5.47 percent at one point in the morning session, weighed by a
massive selling spree by foreign investors. Offshore investors unloaded a net
170.4 billion won (US$139.9 million) worth of local stocks on the Seoul bourse as
of 11:20 a.m.
On Monday, the U.S. House of Representatives turned down the government-led $700
billion emergency rescue proposal designed to buy bad debts from financial
institutions. The decision sent shockwaves across the globe, raising fears that
instability in the financial sector could cascade into the real economy. The Dow
Jones industrial average sank 6.98 percent and the tech-dominated Nasdaq
composite index crashed 9.14 percent.
South Korea's financial watchdog, the Financial Services Commission (FSC), said
earlier in the day that the country will ban short selling of stocks for the time
being as part of efforts to minimize the fallout from the rejected U.S. financial
bailout. The watchdog added that it will also raise the daily limit on share
repurchases to 10 percent from the current 1 percent.
Blue chips were battered across the board, with steel and finance shares losing
the most. Top steelmaker POSCO plummeted 5.07 percent and Shinhan Financial
Group, the country's No. 2 financial services company, shed 3.39 percent.
Exporters, such as tech and automaking companies, also suffered. Tech bellwether
Samsung Electronics fell 2.57 percent and top carmaker Hyundai Motor declined
1.38 percent.
The local currency was trading at 1,216.55 won to the U.S. dollar as of 11:20
a.m., down 27.75 won from Monday's close.
The won fell to a 57-month low versus the greenback on Monday and has lost more
than 23 percent versus the dollar since the start of this year.
News that South Korea's current account deficit widened to a record high in
August also put downward pressure on the already-weakening local currency.
South Korea's currency market has been suffering from a dollar shortage, as banks
and companies are rushing to the safer greenback on concerns over a financial
crisis sparked by the collapse of investment giant Lehman Brothers Holdings Inc.