Seoul shares rose 0.6 percent on Thursday, as chip makers such as Hynix Semiconductor surged following a gain in DRAM spot prices, while Daewoo Shipbuilding towed peers higher after posting strong May earnings. Woori Financial Group jumped 3.91 percent to 23,900 won after the government sold a 5 percent stake overnight reducing worries about share overhang.
The shares also gained on talk South Korea could sell part of its remaining 73 percent stake in Woori to strategic investors such as the National Pension Fund instead of tapping the market. Jay Kim, an analyst at Hyundai Securities said the upturn in the DRAM spot prices boded well for the sector.
"Past experiences show the overall memory market usually turns stronger after such a spike in spot prices. If contract prices rise in line with the spot market trend, makers can expect better DRAM pricing and stronger third-quarter earnings," said Kim.
The benchmark Korea Composite Stock Price Index (KOSPI) rose 0.59 percent to end at 1,794.24 points, recovering from a 1.3 percent drop in the previous session. The benchmark KOSPI is now up 25.1 percent for the year, having set its latest record earlier this week, amid relentless buying by retail investors, who have purchased a net 1.8 trillion won ($1.94 billion) worth of shares in 2007.
Though they sold a modest net 85.1 billion won on Thursday, the strong buying by retail investors is beginning to raise concerns among government officials, with President Roh Moo-hyun quoted by local media as expressing unease this week about the increasing number of trades being done on credit.
Combined trading value in both the KOSPI and the junior Kosdaq reached a record 12.8 trillion won ($13.80 billion) on Wednesday, compared with the daily average of 5.1 trillion won in 2006.
By contrast, foreign investors were net sellers for their 11th session out of 12 on Thursday, ending the day unloading a net 326.5 billion won, according to Korea Exchange data at 0620 GMT. Analysts have attributed the selling to profit taking after the KOSPI has surged far above expectations.
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