South Korean Stocks Fall Most in Two Months as Foreigners Sell

South Korean stocks fell, sending the benchmark index to its biggest loss in two months, as foreign investors cut holdings for the first time in 45 days amid speculation the Federal Reserve may soon pare stimulus.

The Kospi gauge retreated 1.4 percent to 2,030.09 at the close in Seoul, the biggest loss since Aug. 20. Korean Air Lines Co. (003490) sank 11 percent, the most in two years, after saying its shipping affiliate has a “temporary” liquidity shortage. Hyundai Merchant Marine Co. (011200) declined 7.7 percent, while Naver Corp. dropped 5.2 percent.

International investors snapped a record stretch of inflows into Asia’s fourth-largest stock market, selling a net $80 million of shares as of 3:28 p.m. in Seoul, data compiled by Bloomberg show. Economists at Citigroup Inc. and Barclays Plc said yesterday’s Fed policy statement left open the possibility of reduced bond purchases as soon as December.

“Selling of South Korean stocks by foreigners after a record streak of purchases seems to have had negative impact on the market,” said Im Jeong Jae, a Seoul-based money manager at Shinhan BNP Paribas Asset Management Co., which oversees about $28 billion. “Foreigners had held up the Kospi.”

International ownership of Kospi index companies climbed to more than 35 percent of outstanding shares this month, the highest level since July 2007, according to data from the Financial Supervisory Service. They purchased $4.8 billion in October through yesterday, lured by the fastest economic growth in two years, the nation’s strengthening currency and its current-account surplus.

The Kospi reached a two-year high yesterday and has climbed 1.7 percent in October, its fourth-straight monthly gain. The gauge is up 1.7 percent this year.

To contact the reporter on this story: Sharon Cho in Seoul at ccho28@bloomberg.net

To contact the editor responsible for this story: Michael Patterson at mpatterson10@bloomberg.net

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