Seoul shares fell in a very volatile session on Monday as exporters were hit by worries that trouble in the US subprime lending markets would hit US consumer spending and by concerns about a stronger won currency.
Selling also accelerated in afternoon trade as shares in China, South Korea's top export market, dropped on worries the Beijing government would impose policies to cool the country's surging stocks.
Foreign investors continued their heavy selling seen in the main KOSPI throughout this month, coming close to wiping out their net purchases for the year. Trading values dropped to their lowest of the month, reaching 5.7 trillion won ($6.16 billion) in the KOSPI, compared with a daily average in June of 7.8 trillion won.
"The worries over the US mortgage sector look like they will continue for a while," said Lim Chang-gue, a fund manager at Samsung Investment Trust Management. "Except for shipbuilders, shares in other sectors don't seem like they can gain more momentum both relative to their earnings expectations and in terms of their technical levels," he added.
The benchmark Korea Composite Stock Price Index (KOSPI) fell 0.75 percent to end at 1,757.73 points, with the index at one point falling as much as 1.3 percent and gaining as much as 0.84 percent.
It was the KOSPI's second consecutive losing session, after slumping on Friday to end down for the week, cutting short a record run of 15 consecutive weekly gains. Volatility could be the nor ailing hedge funds with steep losses in subprime mortgage bonds focused attention on troubles in the sector.
Trouble in the US housing market could hit consumer spending in South Korea's second-biggest export market, while investors are also mindful that worries about the US subprime market had contributed to a global market sell-off in February.
Flat-panel maker LG.Philips LCD Co Ltd dropped 1.39 percent to 42,450 won, while chip maker Hynix Semiconductor Inc fell 2.88 percent to 33,700 won.
Exporters could also see their profits earned abroad dented and their competitiveness against regional rivals eroded after the South Korean won continues to firm against the dollar and the Japanese yen. Lenders extended falls due to uncertainty about when Lone Star will sell its remaining 51 percent stake in Korea Exchange Bank (KEB), after the US fund sold off a stake in South Korea's fifth-biggest bank last week.
Kookmin Bank, which has been frequently mentioned as still interested in KEB after a deal to buy the lender fell apart last year, fell 1.42 percent to 83,300 won. But Hyundai Motor Co rose 3.22 percent to 77,000 won a day after unionised workers said they would scale back a plan for work stoppages this week that had been intended to protest a US-Korea free trade agreement.
Daewoo Shipbuilding and Marine Engineering Co surged to a record 53,000 won after saying on Friday it had won a 393.1 billion won ($423.7 million) order and adding over the weekend it expected to win further new orders worth a combined $410 million.
Sharesion, with rival China Netcom merging with the GSM arm. Both would benefit by gaining coveted high-growth wireless businesses, bulking up the competition against China Mobile, the world's largest mobile player.
"With restructuring, mobile competition for the overall sector will rise, but it will take a while to materially change China Mobile's 2G lead," said Wendy Liu, industry expert and former Merrill Lynch analyst.