Kospi Index Rises to Five-Week High After Rate Cut: Seoul Mover

South Korean stocks rose, driving the benchmark index to a five-week high, after the Bank of Korea joined central banks in Australia, Europe and India in cutting interest rates this month to boost growth.

GS Engineering & Construction Corp. climbed 6.8 percent, leading building companies higher. Mirae Asset Securities Co. advanced 2.2 percent. Hyundai Mipo Dockyard Co. paced gains among the nation’s shipyards, rising 7.6 percent amid speculation the company’s earnings will improve in the second half of the year.

The Kospi index rose 1.2 percent to 1,979.45 at the close on the Korea Exchange, the highest since April 3. The central bank 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. Ruling New Frontier Party floor leader Lee Hahn Koo yesterday urged a “more active role” for the bank, adding to political pressure for a cut.

“The market has been waiting for the cut for a long time, and it seems the central bank and the government are now working on policy coordination, which is a positive signal,” Kim Jae Dong, a fund manager at Baring Asset Management Korea Ltd. in Seoul, said by phone today. “The reduction would improve domestic consumption.”

The 33-member Kospi Construction Index rallied 3.4 percent, the biggest gain since Dec. 20. It was the best performer among the Kospi’s 19 industry groups.

Domestic institutions purchased a net 189 billion won ($173 million) of stocks today, while foreign investors bought a 134 billion won, according to Korea Exchange data.

The Kospi has lost 0.9 percent this year, compared with a

0.7 percent gain by the MSCI Emerging Markets Index. The South Korean gauge trades at 9.1 times 12-month projected profit, compared with the MSCI gauge’s 10.6 times, data compiled by Bloomberg show.

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