Seoul shares fall on ECB disappointment, grim forecasts

SEOUL: Seoul shares fell on Friday as the European Central Bank (ECB) dashed investor hopes of a bolder action plan to tackle the region's debt crisis, having ruled itself out as a direct lender to governments by purchasing bonds.

"The market had big expectations for the ECB but its comments failed to live up to them," said Chung Seung-jae, a market analyst at Mirae Asset Securities.

The ECB cut interest rates for a second consecutive month and promised an array of liquidity measures to support Europe's cash-strapped banks, but optimism was short-lived after it discouraged expectations that it would act as a direct lender by stepping up bond purchases.

"If more satisfactory moves don't surface in Europe we are set to see further corrections," Chung said.

Institutions were sellers of a net 50 billion won ($44.19 million) worth of stocks, poised to sell shares for a second straight session, while foreign investors offloaded a net 75 billion won.

Also on Friday, South Korea's central bank drastically cut its 2012 GDP growth forecast for Asia's fourth-largest economy to 3.7 percent from the 4.6 percent seen earlier, further depressing market sentiment.

The Korea Composite Stock Price Index (KOSPI) was down 1.66 percent to 1,880.72 points as of 0147 GMT.

Large-cap technology issues led falls, with LG Electronics , the world's No.3 handset maker, down 3.2 percent and LG Display declining 4.5 percent.

KB Financial Group fell 2.1 percent and Shinhan Financial Group lost 2.8 percent.

Brokerages also lost ground, with Woori Investment & Securities shedding 4.1 percent and Samsung Securities down 3.2 percent.

Crude oil refiners were pressured by a second straight sessions of falls in crude oil futures, pointing to lower product prices.

Shares in S-Oil, the country's third-largest crude oil refiner, were down 3 percent and GS Holdings , the holding company of the country's No.2 refiner GS Caltex, lost 2.5 percent.

Defensive issues outperformed, with KT Corp, South Korea's No.2 mobile carrier, edging down 0.4 percent and CJ Corp, a food conglomerate, rising 1.4 percent.