Seoul shares plunge 4 pct on panic selling

(ATTN: ADDS bond yields at bottom)
SEOUL, Oct. 10 (Yonhap) -- South Korean stocks tumbled 4.13 percent Friday on
worries that global moves to cut interest rates would not be enough to ward off a
global economic recession, analysts said. The local currency soared against the
U.S. dollar.

The benchmark Korea Composite Stock Price Index (KOSPI) plummeted 53.42 points to
1,241.47. Volume was moderate at 449 million shares worth 6.22 trillion won
(US$4.54 billion), with losers outpacing gainers 758 to 104.
"The local stock market showed jitters, led by panic selling. But the rebound of
the won's value and a set of measures to calm the stock market helped the KOSPI
trim earlier losses," said Bae Sung-young, an analyst at Hyundai Securities Co.
Mirroring heavy losses of the U.S. markets, the KOSPI tumbled as much as 8.99
percent at one point, falling below the 1,200-point level.
Steep losses caused the Korea Exchange (KRX), the bourse operator, to suspend
program trading at 9:06 a.m for five minutes after the main index's futures
prices fell more than 5 percent. The move to suspend trading was the fifth time
that the KRX has activated a so-called sidecar this year.
But the key stock index cut earlier losses in the afternoon trading mainly
because the local currency bounced back against the greenback during the session
and securities companies and stock-related agencies agreed to set up a fund as a
way to calm the falling stock market.
On Thursday, South Korea's central bank, the Bank of Korea (BOK), slashed its key
interest rate by 0.25 percentage point to 5 percent to soothe global financial
turmoil and stem the drastic slowdown of the local economy. The rate reduction by
the BOK came less than a day after global central banks, led by the U.S. Federal
Reserve, took coordinated rate cuts.
But despite the cuts, U.S. markets tumbled on Thursday on global economic
recession fears. The Dow Jones industrial average plunged 7.33 percent and the
tech-dominated Nasdaq composite index dipped 5.47 percent. It was the first time
in about five years that the Dow fell below 9,000.
Most shares traded in negative territory. Market leader Samsung Electronics
declined 3.7 percent to 521,000 won and top steelmaker POSCO fell 3.24 percent to
358,000 won.
Financial shares took a beating amid the deepening global financial rout. Shares
of KB Financial Group, Kookmin Bank's holding company, shed 2.39 percent to
47,000 won on its first day of trading on the main bourse. KB Financial tumbled
almost 15 percent at one point.
Power monopoly Korea Electric Power plunged 13.6 percent to 24,150 won and top
automaker Hyundai Motor shed 4.06 percent to 68,600 won.
The local currency closed at 1,309 won to the dollar, up 70.5 won from Thursday's
close, after highly volatile trading as exporters unloaded the dollar, dealers
said. Hyundai Motor reportedly dumped dollars earned from exports.
South Korea's financial watchdog said it plans to probe whether speculative
forces are involved in the local currency market. The Financial Supervisory
Service said it will check foreign exchange trading between banks and companies
on a daily basis starting Monday, as part of its moves to probe 'irregular'
currency trading.
South Korea's foreign exchange market has been suffering from a dollar shortage
as banks and companies are scrambling to hoard the safer greenback on concerns of
a financial crisis sparked by the collapse of investment bank Lehman Brothers
Holdings Inc.
Bond prices, which move inversely to yields, rose. The return on three-year
Treasuries declined 0.1 percentage point to 5.23 percent and the benchmark yield
on five-year government bonds fell 0.09 percentage point to 5.25 percent.