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Italian political crisis spooks local investors

May 31,2018
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Korea’s main index dropped nearly 2 percent Wednesday, as investors were spooked by Italy’s political crisis and revived trade tensions between the United States and China. The Korean won depreciated against the dollar.

The benchmark Kospi shed 48.22 points, or 1.96 percent, to close at 2,409.03. Trade volume was high at 8.8 trillion won ($8.15 billion).

The Kospi opened weak on overnight losses on Wall Street and went further south as institutions and foreigners offloaded shares. The index fell as low as 2,399.58 at one point.

“Fears of a trade war between the world’s two largest economies coupled with the Italian crisis seem to have weighed heavily on the market,” said Seo Sang-young, an analyst at Kiwoom Securities.

Foreign investors dumped a net 656 billion won while institutions sold a net 429 billion won. Retail investors bought a net 1 trillion won. U.S. stocks tumbled Tuesday, with the Dow Jones industrial average losing 1.58 percent and the tech-heavy Nasdaq Composite declining 0.5 percent.

Following political turmoil, Italy could face a new election, putting the country’s continued eurozone membership in question.

The Trump administration also announced Tuesday that it would impose a 25 percent tariff on Chinese imports. Market heavyweights declined across the board, with top cap Samsung Electronics plunging 3.51 percent to 49,500 won to mark the third straight session of losses.

Bank shares were bearish, with KB Financial Group dipping 4.03 percent to 52,400 won and Shinhan Financial Group retreating 3.24 percent to 44,750 won. Korea’s largest carmaker Hyundai Motor lost 1.79 percent to 137,500 won, and its auto parts affiliate Hyundai Mobis fell 2.22 percent to 220,500 won. SK Hynix, a major chipmaker, gained 0.21 percent to 95,000 won, and LG Electronics remained unchanged at 96,100 won.

The secondary Kosdaq climbed 4.14 points, or 0.48 percent, to 874.22. Investors went bargain hunting for shares that ended lower in the previous session.

Shares of Celltrion subsidiaries and other pharmaceutical shares led the gains. Foreigners bought a net 34.4 billion won and retailers purchased a net 44.4 billion won. Institutions offloaded a net 61.4 billion won.

The local currency closed at 1,080.90 won against the U.S. dollar, up 4.1 won from the previous session’s close. Bond prices, which move inversely to yields, ended lower. The yield on three-year bonds rose 0.3 basis points to 2.19 percent, and the return on 10-year bonds increased 0.4 basis points to 2.70 percent.


BY KIM EUN-JIN, YONHAP [kim.eunjin1@joongang.co.kr]