Seoul shares dip 1.4 percent, won hits 3-month low on worsening Greek woes

South Korean stocks sank by the most in one month Monday, with the local currency hitting the lowest against the U.S. dollar in three months, as investors were unnerved by debt-mired Greece nearing a sovereign default, analysts said.
  

Greece is set to default on 1.6 billion euros ($1.76 billion) of loans if it doesn't make repayments to the International Monetary Fund by the Tuesday deadline (Greek time).
  

The European Central Bank refused to extend support to Greek banks after bailout talks between Athens and its international creditor banks again failed to reach a deal over the weekend.
  

The situation has exacerbated as Greek Prime Minister Alexis Tsipras said he will put the rescue package to a referendum, over which foreign creditors have expressed disappointment.   
  

"European investors could take a conservative approach and decide to leave Korea and other emerging countries, as we've seen them do that at the time of a crisis over southern Europe," said Kim Yong-gu, a senior analyst at Samsung Securities Co.
  

The benchmark Korea Composite Stock Price Index fell 29.77 points, or 1.42 percent, to close at 2,060.49, the biggest decline since May 27. Trading volume was heavy at 496.9 million shares worth 6.14 trillion won ($5.46 billion) with losers far outpacing gainers 700 to 133.
  

Analysts said growing uncertainties over how the Greece situation will unfold in the short term might sap investor sentiment here, driving them to not make risky bets.
  

The value of European banks' exposure to Greece is estimated at $34.2 billion, accounting for about 26 percent of the amount they'd been exposed to during the eurozone turmoil in 2010, according to them.
  

In a desperate move to stop its financial system from collapsing, the Greek government has shut down its banks and imposed capital controls, but that prompted its people to line up in long lines at banks to withdraw money. Its banks are to remain closed until the July 5 vote.
  

Given the relatively smaller portion, South Korea will likely remain unscathed by the Greek crisis, some said, forecasting limited impact on the local market.
  

"Besides the Greek debt problem, the market has upward potential with the central bank's additional rate cut last month and a proposed extra budget," said Park Seok-hyun, an analyst at Eugene Investment & Securities Co.
  

Foreigners were the main driver of the KOSPI's drop on Monday, unloading a net 110.3 billion won. Institutions turned from a selling mode to snapping up a net 21.1 billion won, with individuals also buying 92.3 billion won worth of shares.
  

Most shares finished bearish, led by brokerages and logistics. Samsung Securities plunged 7.48 percent to 54,400 won.
  

Auto-parts maker Hyundai Glovis slumped 5.25 percent to 198,500 won.
  

In contrast, tech bellwethers gained ground toward the closing bell. Top-cap Samsung Electronics was up 0.23 percent to 1,281,000 won with chipmaker SK hynix rising 1.43 percent to 42,600 won.
  

The prospect of Greece being forced out of the single-currency economy boosted demand for safer assets, causing the U.S. dollar and the Japanese yen to rise against the Korean won.
  

The local currency hit a three-week low to end at 1,125.30 won against the greenback, down 8.4 won from Friday's close.
  

The Japanese yen, which is also regarded as a haven investment, strengthened against the Korean won for a fourth consecutive day.
  

"Investors will prefer safer assets as jitters grow over Grexit," Jun Seung-ji, a researcher at Samsung Futures, said. "The lingering uncertainties over the upcoming referendum on the Greece debt program will weigh down on the global financial market."
  

Earlier in the day, Vice Finance Minister Joo Hyung-hwan said the government has contingency plans to cope with possible risks from the Greek default, vowing close monitoring of developments even though the related risks will have a limited impact on Asia's fourth-largest economy.
  

The Mediterranean country only accounted for 0.2 percent of South Korea's exports as of late last year.
  

The finance ministry also announced a set of measures to boost outbound investment to offset impact from the country's rising currency account surplus, raising expectation for the won's depreciation against major currencies.
  

Bond prices, which move inversely to yields, rallied as investors increased bets on fixed income assets.
  

The yield on three-year Treasurys shed 2.5 basis points to 1.793 percent, and the return on the benchmark five-year government bonds fell 3.1 basis points to 2.070 percent. (Yonhap)