Won Reverses Earlier Gain Amid Concern China Slowdown WorseningBy
Foreigners net sellers of Korean stocks for 29th straight day
Report on North Korean nuclear weapons puts pressure on won
South Korea’s won fell, reversing an earlier gain, as the biggest decline in Chinese stocks in three weeks revived concern over the extent to which Asia’s largest economy is slowing.
Foreign funds were net sellers of Korean stocks for a 29th straight day on Tuesday, exchange data show, as the Shanghai Composite Index of shares closed down 3.5 percent. Barclays Plc cut its 2016 growth forecast for China, South Korea’s largest export market, to 6 percent from 6.6 percent on Monday after economic data released over the weekend trailed estimates.
“Given the fall in the Chinese stock market, people are wary about the slowing Chinese economy,” said Sim Moh Siong, a currency strategist at Bank of Singapore Ltd. in the city-state. “That’s affecting emerging Asian currencies including the won.”
The won dropped 0.3 percent to 1,186.32 a dollar at the close in Seoul after strengthening as much as 0.3 percent earlier, data compiled by Bloomberg show. The currency has fallen 8 percent this year in Asia’s fourth-worst performance.
Overseas investors have pulled $6.6 billion from South Korean shares this quarter, while investing a net $3.3 billion in local bonds.
A report from North Korea’s state news agency that the country’s scientists are working to “guarantee the reliability of the nuclear deterrent” also put downward pressure on the won, said Jude Noh, chief currency trader at Suhyup Bank in Seoul. North Korea is “fully ready” to meet the U.S. and other “hostile forces” with nuclear weapons, according to a Korean Central News Agency report that cited the director of the nation’s Atomic Energy Institute.
Standard & Poor’s raised South Korea’s credit rating from A+ to AA-, the fourth-highest investment grade, on Tuesday, saying the country will maintain an economic growth rate superior to most developed nations in the next three to five years.
Government notes rose, pushing the three-year yield down one basis point to 1.66 percent, Korea Exchange prices show. The 10-year yield fell one basis point to 2.26 percent.
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