Seoul shares hit 38-month high

Seoul shares bounced and hit a 38-month closing high on Tuesday as investor anxiety over growing geopolitical tensions in the Korean peninsula eased, and the market was lifted by gains in steelmakers and crude oil refiners. The Korea Composite Stock Price Index ended up 0.83 percent at 2,037.09 points, the highest close since early November 2007.
"Overriding concerns about South Korea's geopolitical risks have eased due to fairly calm reaction from North Korea following South Korea's military drills," said Han Beom-ho, a market analyst at Shinhan Investment Corp. North Korea stepped back from confrontation over "reckless" military drills by the South on Monday and reportedly issued a new offer on nuclear inspection, drawing a cautious response from Seoul and Washington.
"Upside momentum will probably continue through end of this year," Han added. Foreign investors were sellers of a net 35.2 billion won ($30.50 million) worth of stocks, poised to snap a six consecutive session buying streak. Shares in Hyundai Engineering & Construction jumped more than 5 percent after news its shareholders were set to name Hyundai Motor Group a preferred bidder for South Korea's largest builder, having ended talks on a 5.5 trillion won ($4.8 billion) take-over by Hyundai Group.
But shares in Hyundai Motor retreated 1.7 percent and Kia Motors shares were flat. Shares in steelmakera rallied on expectations of higher steel prices due to falling inventories, analysts said. "Steelmakers were largely left out during the market's recent rally, and we are hearing inventories are falling, which will certainly help steel prices," said Eom Jin-seok, an analyst at Kyobo Securities.
"Economic recovery hopes for the US and Europe are also buoying sentiment," Eom added. Shares in POSCO, the world's No 3 steelmaker, were up 4.4 percent and Hyundai Steel jumped 7.2 percent, with trading volume for the shares 2.3 times its 30-day average daily trading volume.
Shares in crude oil refiners traded firmly, with SK Energy, the country's top crude oil refiner, rallying 6.2 percent. GS Holdings, the parent firm of the country's second-biggest refiner GS Caltex, rose 5 percent. "Refining margins are steadily improving and demand is also seen robust," said Kim Jae-joong, an analyst at Woori Investment & Securities.