Bloomberg News

South Korean Stocks Drop Most in Asia Amid Europe Debt Concerns

September 14, 2011

Sept. 14 (Bloomberg) -- South Korean shares fell, dragging the benchmark stock index to the biggest drop in Asia, amid concerns Europe’s debt crisis will hurt the global economy.

The Kospi Index lost 3.5 percent to 1,749.16 as of 3 p.m. close in Seoul, the lowest level since Aug. 22. South Korean markets were shut for holidays the past two days, during which the MSCI Emerging Markets Index slipped 2.8 percent on concern Greece will default and deepen the global economic slowdown. The MSCI Asia Pacific Index sank 2.1 percent in the same period.

Samsung Electronics Co., South Korea’s biggest exporter of consumer electronics, and Hyundai Motor Co., the nation’s largest automaker, led losses. Greek Prime Minister George Papandreou will hold a conference call with German Chancellor Angela Merkel and French President Nicolas Sarkozy today. Chinese Premier Wen Jiabao today called on developed nations to cut their debt and create jobs rather than rely on his nation to bail out the world economy.

“Uncertainties are still high, and we may see volatile trades for a while,” said Im Jeong Jae, a Seoul-based fund manager at Shinhan BNP Paribas Asset Management Co., which oversees about $29 billion. “Greece is a de facto default situation, and the key issue here is how other countries would react.”

Officials from South Korea’s Finance Ministry held an emergency meeting yesterday to discuss Greece and the European sovereign-debt crisis. Officials will enhance monitoring of capital flows and markets to cope with any turbulence, with the focus on European banks’ capital movements, the ministry said in a statement yesterday.

Bear Market

The Kospi sank 12 percent in August, the steepest monthly loss since October 2008, as signs of slowing U.S. economic growth and concern Europe’s debt crisis is spreading fueled speculation that demand for South Korea’s exports will fall. The gauge is down 22 percent from its May 2 record high. A drop of 20 percent or more signifies a bear market to some investors.

Stocks in the Kospi trade at 8.9 times estimated profit, the second-lowest valuation in Asia after Pakistan’s benchmark gauge, according to data compiled by Bloomberg. That compares with 9.7 times for the MSCI Emerging-Markets Index.

Samsung Electronics, Asia’s biggest maker of chips, flat screens and mobile phones, sank 3.5 percent to 753,000 won. Hyundai Motor dropped 3.3 percent to 191,000 won. Hyundai Heavy Industries Co., the world’s biggest shipbuilder, lost 5.4 percent to 288,000 won.

Korean Air Lines Co., South Korea’s largest carrier, tumbled 4.1 percent to 56,200 won after Goldman Sachs Group Inc. cut its stock rating to “sell,” citing a deteriorating earnings outlook.

Samsung SDI Co. sank 5.6 percent to 110,500 won. HI Investment & Securities Co. reduced its share-price estimate to 180,000 won from 210,000 won, citing uncertainties over the company’s solar business.

--Editors: Darren Boey, Matthew Oakley

To contact the reporter on this story: Saeromi Shin in Seoul at sshin15@bloomberg.net

To contact the editor responsible for this story: Darren Boey at dboey@bloomberg.ne


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