South Korean shares were weaker early on Tuesday, reversing earlier gains, as offshore investors offloaded stocks for a fourth consecutive session and political tensions over North Korea rattled investor sentiment. The Korea Composite Stock Price Index (KOSPI) was down 0.1 percent at 2,143.10 points as of 0252 GMT, paring a rally earlier in the session in which it briefly touched its highest level since April 7.
Offshore investors sold a net 21.1 billion Korean won ($18.55 million) worth of KOSPI shares near mid-session, although this was less than Monday’s 111.7 billion won. Decliners outnumbered advancers by 426 to 343. Kim Ye-eun, a stock analyst at Cape Investment & Securities, said the KOSPI won’t fluctuate drastically over tensions between the United States and North Korea as investors now largely see the South Korean economy as fundamentally sound enough to withstand such geopolitical risks.
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The upcoming May 9 presidential election at home is also providing stocks with support, said Rhoo Yong-seok, a stock analyst at KB Securities. “The investors seem to be focusing more on the candidates’ major policies and how they are going to boost the economy rather than North Korea issues,” said Rhoo. Kim added foreign investors remain reluctant to turn net stock buyers in coming weeks as other risks remain, such as France’s presidential election, and possible changes to the existing free trade agreement between South Korea and the United States.
U.S. Vice President Mike Pence told business leaders in Seoul on Tuesday that the Trump administration will review and reform the five-year-old free trade agreement between the two countries. The South Korean won was flat with the local currency standing at 1,137.8 against the dollar, little changed from Monday’s close of 1,137.7. It had been higher against the dollar shortly after opening, but gains were erased by midday after Pence’s comments and by North Korea-related tensions.
“It is too early to say if anxieties about the North have cleared up, and traders need to take a neutral stance on this issue,” said a bank dealer in Seoul who declined to be named. Meanwhile, June futures on three-year treasury bonds lost 0.01 point to 109.44.(Reporting by Dahee Kim; Additional reporting by Kyoungho Lee; Editing by Sam Holmes)