South Korea’s Kospi Falls Most in Week on Earnings, North Korea

South Korean stocks fell, dragging the benchmark index down to its biggest loss in a week, as foreign investors sold equities on concern profit of builders and shipyards will slump and North Korea tensions may increase.

GS Engineering & Construction Corp. (006360), which reported an unexpected loss this week, tumbled by the daily limit for a second day. Hyundai Heavy Industries Co. led declines among shipbuilders, falling 6 percent. Hyundai Mobis (012330) Co., South Korea’s No. 1 auto-parts maker, slumped 6.6 percent after Woori Investment & Securities Co. said the company’s quarterly earnings may fall short of consensus estimates.

The Kospi index fell 1.3 percent to 1,924.23 at the close on the Korea Exchange, taking its weekly loss to 0.2 percent. Foreigners sold a net 47 billion won ($42 million) worth of stocks listed on the Kospi, after two days of net purchases, Korea Exchange Inc. data show. The U.S. Defense Intelligence Agency has reported that North Korea now has some nuclear weapons small enough to be delivered by its ballistic missiles.

“Some foreign investors appear to have reduced their positions because they were uncertain how the situation on the Korean peninsula will develop over the weekend,” Im Jeong Jae, a Seoul-based fund manager at Shinhan BNP Paribas Asset Management Co., which oversees about $28 billion, said by phone. “There were also jitters over earnings for some industries.”

North Korea may conduct a weapons test to coincide with the 101st anniversary of state founder Kim Il Sung’s birth on April 15, South Korean Defense Ministry spokesman Kim Min Seok said yesterday in Seoul. The regime reiterated that it is on a war footing and its warheads are programmed with target coordinates.

Earnings Slump

The Kospi trades at 8.8 times 12-month projected profit, compared with 10.3 times for the MSCI Emerging Markets Index, data compiled by Bloomberg show.

GS Engineering tumbled 15 percent to the lowest level since July 2005. The Seoul-based builder posted an operating loss of 535.4 billion won for the first quarter. Samsung Engineering Co., which is scheduled to report its quarterly earnings on April 16, sank 9.1 percent.

Hyundai Heavy dropped to the lowest since January 2010, while Samsung Heavy Industries Co. (010140) lost 6.2 percent. An earnings turnaround at the country’s shipbuilders will be difficult in 2013, Hyundai Securities Co. said in a report today.

Hyundai Mobis tumbled the most in 14 months in Seoul. The company’s first-quarter operating profit may be 725 billion won, falling short of the consensus estimate of 774 billion won, Woori Investment said in a report today.

-- Editors: Allen Wan, 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.net

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