South Korean stocks fell the most in nine months, led by exporters, after the won climbed to its highest level against the yen in more than four years.
The Kospi index lost 1.8 percent, the most since July 23, to 1,944.75 at close in Seoul. The gauge dropped 1.1 percent this week. Samsung Electronics Co., the world’s biggest maker of mobile phones, sank 2.6 percent, while Kia Motors Corp. dropped 3.3 percent. Lotte Shopping Co. slumped the most since June 2011 on lower-than-estimated operating profit.
The Kospi has declined 2.6 percent this year, compared with a 0.2 percent loss by the MSCI Emerging Markets Index, as a 13 percent gain in the won against the yen hurt the competitiveness of South Korean exporters against Japanese rivals. Kia, South Korea’s second-largest automaker, reported on April 26 a 35 percent drop in first-quarter profit as the won’s strength dragged on sales.
“The weaker yen is chilling sentiment toward Korean companies that are competing with Japanese names in key global markets,” Im Jeong Jae, a Seoul-based fund manager at Shinhan BNP Paribas Asset Management Co., which oversees about $28 billion, said by phone today. “It will inevitably be left as a burden for the Korean market if the yen continues to weaken.”
The won gained 1 percent to 10.95 versus the yen today, poised for the highest close since September 2008, and dropped 1.4 percent against the dollar. South Korea’s currency has risen against the yen this year amid pledges of unprecedented monetary stimulus by the government of Japan’s Prime Minister Shinzo Abe.
Domestic institutions sold a net 237 billion won ($214 million) of stocks today, while foreign investors sold 176.4 billion won, according to Korea Exchange data.
The Kospi climbed 1.2 percent yesterday to a five-week high after the Bank of Korea lowered the benchmark seven-day repurchase rate to 2.5 percent from 2.75 percent, a move that was predicted by six of 20 economists surveyed by Bloomberg News. The South Korean gauge trades at 8.9 times 12-month projected profit, compared with the MSCI Emerging Markets Index’s 10.5 times, data compiled by Bloomberg show.