South Korean stocks advanced Monday to end their three-day losing streak. with construction and tech companies leading the rally, as the government's 50 trillion-won ($35 billion) liquidity support plan eased worries about growing credit crunch risks. The local currency ended nearly flat against the US dollar.
The benchmark Korea Composite Stock Price Index rose 23.04 points, or 1.04 percent, to close at 2,236.16. Trading volume was moderate at 434 million shares worth 6.76 trillion won with gainers outnumbering decliners 622 to 246.
On Sunday, the financial authorities said they will expand liquidity supply programs to at least 50 trillion won to calm the corporate bond market unnerved by the default on the debt payment by the developer of an amusement park in Gangwon Province.
The failure to repay 205 billion won in debt has jolted the market as many institutional investors bought the asset-backed commercial papers issued by the developer, Gangwon Jungdo Development, which is 44 percent owned by the province.
It has also stoked worries over the negative impact rippling across the property project financing sector.
Analysts said recent comments by Fed officials on the need to slow the pace of interest rate increases also boosted investor sentiment.
Mary Daly, president of the San Francisco Federal Reserve Bank, suggested planning for "stepping down" the monetary tightening aimed at reducing decades-high inflation.
Chicago Federal Reserve Bank President Charles Evans also said the interest rate increases should be put on hold at a little above 4.5 percent.
"Their remarks are reasonable considering the growing recession risks. But any kind of dovish signals would only work for the short term, even if the Fed indicates slowing the rate hike from December," said Noh Dong-kil, an analyst at Shinhan Investment & Securities Co.
"To see an upturn trend in equities, what we need is confirmation that the core inflation has peaked," Noh said.
The market widely predicts another 0.75 percentage-point rate hike by the Fed in December.
The plan to expand liquidity support sent construction companies rallying in Seoul, with Hyundai Engineering & Construction jumping 2.3 percent to 34,950 won and GS Engineering & Construction soaring 3.5 percent to 22,450 won.
Top-cap Samsung Electronics closed up 2.86 percent at 57,500 won.
Battery materials producer Posco Chemical spiked 4 percent to 194,500 won after reporting its largest quarterly operating profit for the third quarter ever.
In contrast, top automaker Hyundai Motor tumbled 3.3 percent after reporting a decline in the third quarter net profit, due to massive provisions for after-sales services involving the Theta II engine.
The local currency ended at 1,439.70 won against the US dollar, up 0.1 won from Friday's close. (Yonhap)
