Seoul shares sink at steepest pace in 4 months, won dips to near 3-month low

Seoul, Aug 2 (IANS) South Korean stocks tumbled at the steepest pace in nearly four months on Friday as investor sentiment was dragged down by the government's tax revision proposal to raise taxes on corporations and stock investors. The local currency lost sharply against the U.S. dollar to top the 1,400-won line for the first time since May.

The benchmark Korea Composite Stock Price Index (KOSPI) shed 126.03 points, or 3.88 percent, to close at 3,119.41, marking the largest daily loss since April 7, when the index plunged 5.57 percent, reports Yonhap news agency.

Trade volume was moderate at 504.4 million shares worth 15.1 trillion won (US$10.8 billion), with losers beating winners 882 to 37.

Foreigners and institutions led the bearish mode, selling a net 656.5 billion won and 1.07 trillion won worth of shares, respectively, while individuals bought a net 1.63 billion won.

Analysts pointed to the government's tax revision proposal, which was announced after the market closed on the previous day.

According to the proposal, the corporate tax rate would rise by 1 percentage point in all brackets, reversing the previous administration's expansionary policy.

The government also plans to lower the minimum threshold for capital gains tax, raising the number of taxable investors significantly.

"The government's stimulus, including the recent revision of the Commercial Act, was a main driver of the stock market in July," Lee Jae-won, an analyst from Shinhan Securities Co., said. "But the tax revision undermines disappointed investors."

Most shares ended in negative territory.

Market bellwether Samsung Electronics fell 3.5 percent to 68,900 won, and its chipmaking rival SK hynix sank 5.67 percent to 258,000 won.

Top carmaker Hyundai Motor dropped 1.41 percent to 210,000 won, and its sister Kia declined 1.47 percent to 108,000 won.

Defence giant Hanwha Aerospace slumped 5.72 percent to 939,000 won, and LIG Nex1 slid 5.75 percent to 592,000 won.

Bank shares also went south, as Hana Financial Group slipped 3.63 percent to 82,300 won and KB Financial Group dipped 4.42 percent to 106,000 won.

However, major shipbuilder Hanwha Ocean rose 4.54 percent to 117,400 won as the company was expected to play a key role in a $150 billion shipbuilding cooperation initiative proposed by the South Korean government as part of the Seoul-Washington tariff deal.

The local currency was quoted at 1,401.4 won against the greenback at 3:30 p.m., down 14.4 won from the previous session, marking the lowest won-dollar rate since May 14, when it was 1,420.20 won.

Bond prices, which move inversely to yields, closed lower. The yield on three-year Treasurys added 1.8 basis points to 2.478 percent, while the return on the benchmark five-year government bonds rose 3.5 basis points to 2.623 percent.

—IANS

na/