Seoul shares skid as foreigners dump holdings due to BOJ, N.Korea

Fri Apr 5, 2013 8:13am BST

* KOSPI ends down 1.64 pct at 4-mth low

* Japan's strong monetary easing hits S.Korean exporters

* Investors wary about prolonged N.Korea tensions

* Hyundai Motor extends slide on yen's fall, recall plan

* Samsung Elec steady despite robust earnings f'cast

By Hyunjoo Jin

SEOUL, April 5 (Reuters) - South Korean shares slid on Friday with foreign investors selling their biggest daily amount in nearly 20 months, hurt after aggressive easing from the Bank of Japan sent the yen reeling, as well as by tensions on the Korean peninsula.

The yen's sharp decline, which comes on the back of steady weakening since new Japanese Prime Minister Shinzo Abe began calling for strong policy action late last year, enhances the competitiveness of Japan's exporters at the expense of their Korean counterparts.

"When you look at Asian stock markets, Korea and Japan are going into opposite directions," said a fund manger at foreign asset management firm.

"Foreign funds are unlikely to come back to the domestic stock market until it becomes clear whether Japan's monetary easing will succeed or not," he said on condition of anonymity because he is not authorised to speak to the media.

The Korea Composite Stock Price Index (KOSPI) ended down 1.64 percent at 1,927.23 points, its lowest closing level since Nov. 28. For the week, the KOSPI fell 3.9 percent, its worst performance in more than 10 months.

Foreign investors dumped a net 672 billion Korean won ($598 million) worth of stocks as of 0614 GMT, the biggest amount since Aug. 10 in 2011, according to Korea Exchange data.

By contrast, Tokyo stocks ended up 1.6 percent, after surging as much as 4.7 percent to near five-year highs at one point.

Investors have also been increasingly wary of North Korean risks since the reclusive nation decided to ban entry to workers from the South to their joint industrial complex, and Washington made military moves and remarks showing that it takes Pyongyang's threats seriously.

"Rising rhetoric is prolonging the effect of North Korean risk compared to previous instances when the market rebounded quickly after definite events such as an attack," said Kim Joong-won, an analyst at NH Investment & Securities.

Auto shares fell, with Hyundai Motor slumping 4.4 percent and Kia Motors skidding 4.7 percent, hurt by the yen's plunge and recall plans.

Hyundai Motor and its affiliate Kia, which rank fifth in global sales, plan to recall almost 1.9 million cars in the United States to fix a potentially faulty brake light switch.

"The recall will not have a big impact on their earnings, but there are concerns that it may undermine credibility about quality, and Hyundai and Kia may fail to defend their market share in the U.S. market," said Oh Hyun-seok, chief market strategist at Samsung Securities.

Shares in Samsung Electronics were little changed even after the smartphone maker issued new operating profit guidance of $7.7 billion for the January-March period, better than analysts' forecasts.

Move on day -1.64 percent

12-month high 2,029.03 6 April 2012

12-month low 1,769.31 25 July 2012

Change on yr -3.496 percent

All-time high 2,231.47 27 April 2011

All-time low 93.10 6 January 1981 ($1 = 1123.7500 Korean won) (Additional reporting by Seongwon Chang, Joyce Lee and Daum Kim; Editing by Edwina Gibbs)

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