August 5, 2019 / 2:50 AM / 4 months ago

S.Korea stocks shed over 2% as Japan trade spat spirals

    * KOSPI index hits lowest since Nov 2016, foreigners net
    * Korean won drops over 1% vs U.S. dollar
    * South Korea benchmark bond yield falls

    By Hayoung Choi
    SEOUL, Aug 5 (Reuters) - South Korean shares fell more than
2% on Monday as Japan's decision to drop South Korea from
fast-track export status weighed on the market, which has been
already battered by fragile corporate earnings.
    Japan on Friday said it will remove the neighbouring country
from a list of countries that enjoy minimum export restrictions
from Aug. 28, pushing the benchmark KOSPI         down nearly
    As of 0242 GMT, the Seoul stock market's main KOSPI fell
42.16 points or 2.11% to 1,955.97. In early trade, the benchmark
index was down as much as 1953.01, marking the lowest since
November 2016.
    "Tension between Seoul and Tokyo has become an all-out war
and investors are failing to recover confidence amid a series of
weak corporate earnings in the second quarter," said Byun Juno,
head of Eugene Investment & Securities research centre.
    "Uncertainties over the Japan-Korea dispute make the
situation worse. Some global firms may feel reluctant to buy
South Korean products if they expect South Korean suppliers will
fail to provide goods in time due to Japan's tighter
restrictions," he added. 
    South Korea on Monday announced plans to invest about 7.8
trillion won ($6.44 billion) in research and development for
local materials, parts and equipment over the next seven years
in an effort to cut reliance on Japanese imports.             
    However, such measures are expected to take some time to
kick in, according to analysts.
    The junior KOSDAQ         also lost more than 4%, hovering
around the 590-point mark for the first time since December
    As offshore Chinese yuan        fell below 7 per dollar,
South Korea's won hit its lowest versus the dollar since March
    The won was quoted at 1,212.2 per dollar on the onshore
settlement platform           , 1.17% lower than its previous
close at 1,198.0.
    Amid greater appetite for safe-haven assets, the currency
marked its lowest against the Japanese yen            since July
    Foreigners were net sellers of 104.7 billion won ($86.39
million) worth of shares on the main board on Monday. 
    Amid a protracted trade war between the United States and
China, the KOSPI has fallen 4.07% so far this year, and lost
6.0% in the previous 30 trading sessions. The won has lost 8.0%
against the U.S dollar so far this year.
    In money and debt markets, September futures on three-year
treasury bonds         rose 0.20 points to 111.17, while the
3-month Certificate of Deposit rate was quoted at 1.50%.
    The most liquid 3-year Korean treasury bond yield fell by
5.7 basis points to 1.204%, while the benchmark 10-year yield
fell by 7.4 basis points to 1.278%.
 ($1 = 1,211.9000 won)

 (Reporting by Hayoung Choi; Editing by Shounak Dasgupta)
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