South Korean stocks edged down Tuesday after tumbling more than 5 percent as investors were spooked by U.S. lawmakers' rejection of a government proposal to rescue the teetering financial sector. The Korean currency fell to a 64-month low against the U.S. dollar.
The benchmark Korea Composite Stock Price Index (KOSPI) fell 8.3 points, or 0.57 percent to 1,448.06. Volume was moderate at 399.2 million shares worth 5.37 trillion won ($4.45 billion), with losers outpacing gainers 549 to 247.
"An unexpected rejection of the bailout plan severely hurt investor sentiment, sending the KOSPI below the 1,400-mark at one point. But institutional buying and the financial regulator's plans to impose a ban on short selling of stocks helped pare earlier sharp losses," Bae Sung-young, an analyst at Hyundai Securities, was quoted as saying by Yonhap News..
The KOSPI tumbled 5.47 percent at one point in the morning session, weighed by a selling spree by foreign investors. Offshore investors unloaded a net 126 billion won worth of local stocks on the Seoul bourse.
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 around the world, 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.
Blue chips lost ground across the board, with steel and machinery shares falling the most. Top steel maker POSCO declined 2.64 percent to 442,000 won and Shinhan Financial Group, the country's No. 2 financial services company, fell 1.99 percent to 41,900 won.
But automakers reversed their earlier falls on expectations that a weaker won would boost exports of cars. Top carmaker Hyundai Motor gained 1.24 percent to 73,500 won and its affiliate Kia Motors advanced 2.81 percent to 14,650 won.
The tech-savvy Kosdaq market also lost 1.18 percent to 440.77 after tumbling sharply in the morning.
The Korean currency closed at 1,207 won to the dollar, down 18.2 won from Monday's close, as investors were dented by the U.S. Congress' rejection of an emergency rescue plan.
It was the lowest level since May 29, 2003, when the local currency finished at 1,207 won against the greenback. The won has lost more than 22 percent versus the dollar so far this year, putting upward pressure on already-high inflation.