CDS premium down, KOSPI up on improved sentiment


Korea’s stock market ended higher on Friday, helped by a new European deal aimed at slashing Greece’s massive debt, amid declining credit default swap premiums pointing to stabilizing sentiment.

The benchmark KOSPI closed up 0.39 percent at 1,929.48 on foreign and institutional buying. The tech-heavy KOSDAQ, however, dropped 1.3 percent to 490.59. The Korean won closed at 1,104.9 won against the U.S. dollar, strengthening from 1,115.2 won a day earlier. The won’s weekly gain reached 3.7 percent.

Samsung Electronics Co., a key player on the KOSPI, announced its third-quarter earnings on Friday, revealing that its handset business, led by smartphone sales, drove its profit.

Samsung’s net profit reached 3.44 trillion won ($3.09 billion) in the July-September period, down 23 percent from a profit of 4.46 trillion won one year ago.

Sales at Samsung, the country’s biggest tech company whose market capitalization is about 139 trillion won, rose 3 percent on-year to 41.27 trillion won during the third quarter. Samsung shares closed up 2.27 percent to close at 945,000 won.

Stocks across Asian rose on Friday amid heightened expectations that the latest European deal would help prevent the crisis from spreading to other countries including Italy.

The eurozone deal also lowered the cost of insuring Korea’s sovereign debt against default, calming down jittery investors here to some extent.

The credit swap default premium on Korea’s foreign currency bonds went down 14 basis points to 136 basis points on Thursday, according to the Korea Center for International finance. A basis point is 0.01 percentage point.

The spread on CDS is widely used as a gauge on the credit of Korean government bonds. A widening spread signals higher costs for bond issuance.

The fall in CDS premium came as European leaders agreed on a write-down of 50 percent of banks’ Greek bond holdings and other measures aimed at tackling the protracted crisis that raised the specter of another financial crisis.

The KOSPI’s Friday closing of 1,929.48 marked a 17.3 percent rise from 1,644.11 recorded on Sept. 26.

The Korean stock market had been under selling pressure in the past couple of months as the eurozone crisis and the concerns over a recession in the U.S. panicked investors.

The country, whose economy depends heavily on exports, saw its gross domestic product grow 3.4 percent in the third quarter from a year earlier, weakened by weaker consumer spending and sluggish capital investment.

By Yang Sung-jin (insight@heraldcorp.com)