Volatility likely to increase unless EU resolves crisis: analysts



Seoul stocks took a nosedive Wednesday amid increasing concerns over the European debt crisis, driving foreign investors to sell and seek safer investment assets such as the U.S. dollar and gold, analysts said.

Also, the news that Apple is likely to decrease its DRAM memory chip orders from Samsung Electronics, Korea’s biggest blue chip traded on the Seoul market, increased downward pressure on Korean stocks.

The benchmark KOSPI finished at 1,840.53 points, down 58.43, or 3.08 percent.

The tech-heavy KOSDAQ also plummeted 15.49, or 3.22 percent, to 465.01 points.

The broader stock market’s downturn was led by weak IT and automobile shares, with analysts emphasizing the fall of Samsung Electronics shares.

Samsung Electronics, hit by the Apple news, ended down 81,000 won ($69), or 6.18 percent, at 1.23 million won, with a market cap of about 181 trillion won, down from its high of 200 trillion won.

Shares of Hyundai Motor, the second biggest blue chip, ended down 10,000 won, or 3.99 percent, at 240,500 won, while POSCO, the third biggest traded stock, edged down 8,500 won, or 2.23 percent, to 372,500 won.

Apple has placed huge orders for DRAM chips with Japan’s bankrupt Elpida Memory, the world’s third largest memory chip maker with which U.S.-based Micron Technology is in the process of merging, according to media reports.

This is leading to market speculation that Apple, which is in a patent dispute with Samsung Electronics over smart phones, will gradually reduce its semiconductor dependence on the Korean tech giant.

Also, foreign investors, which account for about 30 percent of the Korean stock market capitalization, have been selling their shares for 11 consecutive trading days, amounting to more than 2 trillion won as of this month, analysts pointed out.

With investment sentiment waning globally, the stock market is bound for further corrections going forward, analysts said.

“The European woes are likely increase volatility unless the markets see some improvement in the region, especially Greece, in the near term,” said Sung Young-bae, an analyst at Hyundai Securities.

Greece has indicated that it would not pay back its debt as it faces growing calls from other EU economies for strengthened austerity measures, according to media reports.

Lee Seung-woo, an analyst of Daewoo Securities, said that the broader market is likely to face “irregular” trading as long as the European economies do not move toward resolving their crisis.

By Park Hyong-ki (hkp@heraldcorp.com)