Posted : 2017-08-11 16:46
Updated : 2017-08-11 16:46

Seoul stocks tumble on foreign selloffs

By Yoon Ja-young

Seoul stocks extended steep falls as foreign investors continued to offload their holdings on growing tension between North Korea and the United States, dealers said.

The KOSPI closed at 2,319.71 points Friday, down 1.69 percent. The KOSDAQ dropped 1.83 percent to 628.34.

Foreign investors continued to dump stocks, selling 3.3 trillion won of stocks since July 24 when KOSPI started shaking. They were net buyers in only three of the past 16 trading days.

Kim Yong-gu, an analyst at Hana Financial Investment, said escalating tensions amid a war of words between North Korea and the United States has dampened investor sentiment. The authoritarian regime threatened to fire missiles around the U.S. territory of Guam, while the U.S. President Donald Trump is intensifying criticism against its leader Kim Jong-un.

However, Kim played down the fiery rhetoric, saying the current tension is unlikely to escalate to armed conflict.

"The U.S.-North Korean conflict gave the market a good excuse to cool down following too steep gains," Kim said.

Seo Sang-young, a strategist at Kiwoom Securities, said the recent selloff by foreign investors is due to slowdown of corporate performances. They take it an opportunity to take profits.

However, Seo said the market will withstand geopolitical risks. "When considering that leading indicators of Korea's exports are continuing the rise, and that the prices of industrial resources are stabilizing thanks to the weak dollar, the profit growth led by exports is likely to go on," he said. "The selloff by foreign investors is not likely to continue for long term."

With the stocks and won extending their falls, the finance ministry, trade ministry, financial regulators and the Bank of Korea held a meeting Friday, examining the impact of the North Korean threats on the financial market and the economy.

"Due to North Korea's threats, volatility has been expanding in the financial market and the foreign exchange market," the government noted.

The local currency has weakened against the dollar. The won closed at 1,143.5 won per dollar Friday, compared with 1,125.1 won on Aug. 8.

The government noted that there is the possibility of deeper and longer impact, depending on factors like North Korea's additional provocation and countermeasures by related countries.

"Most of all, the market volatility can expand at a small event since there is high uncertainty regarding how it will evolve."

The government said it will strengthen monitoring on the financial market and the economy.

"We will quickly take measures based on the contingency plan in case it is needed. We will also immediately provide the right information to foreign investors, media and the credit rating agencies, strengthening communication with the market."

Stock analysts explain foreigners have been selling shares to decrease IT stocks in their portfolios following the sector's recent gains.

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