South Korean stocks closed 0.74 percent lower Monday, as an ongoing liquidity crisis of a South Korean conglomerate unnerved investors, analysts said. The local currency inched down against the U.S. dollar.
The benchmark Korea Composite Stock Price Index (KOSPI) declined 14.84 points to finish at 1,996.96. Trading volume was light at 283.1 million shares worth 4.09 trillion won ($3.79
billion) with losers far outstripping gainers 540 to 277.
Tong Yang Group, the 38th-largest family-run company in the country, filed for court receivership of three of its affiliates earlier in the day as a last-ditch effort to avert bankruptcy and keep afloat.
It has been under mounting pressure to repay debts worth 110 billion won by Monday, which accounts for only a tenth of what it needs to pay back in the remaining three months of this year.
The KOSPI has also been weighed down by concerns on a possible government shutdown in the U.S. as lawmakers are struggling to agree on a national health care overhaul and debt ceiling.
But analysts said such external risks will only be a short-term risk for the Seoul bourse, as evidenced by a sound foreign inflow seen on Monday.
"There's a low chance that such political jitters will affect local equities, although they do have some limited negative impact," said Han Beom-ho, an analyst at Shinhan Investment Corp.
Foreign investors scooped up a net 116.4 billion won worth of shares, while institutions unloaded a net 81.3 billion won.
Bearish automakers contributed to the KOSPI's drop. Industry leader Hyundai Motor dipped 2.14 percent to 251,000 won, and its auto parts affiliate Hyundai Mobis fell 2.56 percent to 286,000 won.
Financial stocks finished lower mainly on fear that the liquidity crisis of Tong Yang Group could spread to a systemic risk in the market. Woori Investment & Securities ended 2.11 percent lower to close at 11,600 won.
Shares of Tong Yang Group affiliates took a dive, with its brokerage unit Tongyang Securities plunging 14 percent to 2,460 won and Tongyang Cement & Energy tumbling 7.43 percent to 2,305 won.
local currency ended at 1,074.70 won against the greenback, down 1 won from Friday's close, largely due to the KOSPI's fall, dealers said. (Yonhap News)
