Seoul shares fall below 1,700

The KOSPI fell below 1,700 amid the news that Moody’s downgraded Italy’s sovereign rating by three notches, losing for the second consecutive session.

The nation’s benchmark index lost 39.67 points, or 2.33 percent, to close at 1,666.52 on the Korea Exchange.

Big companies such as Hyundai Motor and Hyundai Mobis led the declines by dropping 3.9 and 6.69 percent, respectively.

In addition to the Italy-related news, shares in construction firms lost ground on concerns over their order outlook sparked by sharp falls in crude oil prices, which may slow plant orders from oil producing countries in the Middle East.

Shares in Daewoo Engineering & Construction were down 8.3 percent and Hyundai Engineering & Construction tumbled 12.3 percent.

The tech-heavy Kosdaq also lost for the second consecutive session to close at 421.18, falling 14.95 points, or 3.43 percent.

Moody’s downgraded Italy to A2 from Aa2, a lower rating than it holds on Estonia and on a par with Malta and kept a negative outlook on the rating.

The cuts underline growing investor concern about the euro zone’s third-largest economy, which is now firmly at the center of the debt crisis and dependent on help from the European Central Bank to keep its borrowing costs under control.

“The negative outlook reflects ongoing economic and financial risks in Italy and in the euro area,” Moody’s said in a statement.

The rating agency said the uncertain market environment and the risk of further deterioration in investor sentiment could constrain the country’s access to the public debt markets.

Moody’s decision came as little surprise after the agency said on Sept. 17 that it would finish a review for possible downgrade of its rating on Italy within a month.

Meanwhile, the Korean currency gained by 3.6 won against the U.S. dollar to reach 1,190.4 won, after losing ground against the greenback for the third consecutive session.

Some analysts allege policymakers have reportedly actively intervened in the market over the past few weeks.

By Kim Yon-se (kys@heraldcorp.com)