S. Korean market loses ground over Trump-Kim summit breakdown

The South Korean stock market, the Korean won and bond prices lost ground Thursday following the summit between US President Donald Trump and North Korean leader Kim Jong-un, which ended without any agreement contrary to widespread anticipation for a breakthrough.

The nation’s main bourse Kospi closed 1.76 percent or 39.35 points lower from the previous trading day at 2,195.44, while the Kosdaq ended 2.8 percent lower at 731.25. The Kospi marked its biggest daily percentage loss since late October last year, and the first time it fell below the 2,200 level in nearly two weeks. 

The Korean won also weakened against the US dollar, down 5.6 won from the previous day.

Bond prices, which move inversely to yield, closed lower. The yield on three-year Treasurys gained 0.5 basis point to 1.813 percent, and the return on benchmark five-year government bonds rose 0.3 basis point to 1.876 percent.

North Korea-related stocks, including hotel and resort operator Ananti, continued to tumble throughout the day as the mood surrounding the summit soured. Ananti closed at 21,000 won ($18.76) per share, 25.83 percent lower from the previous close.

Shares of South Korean companies with business interest in the North had been buoyed by the anticipation surrounding the summit since last month, but most fell nearly 20 percent throughout Thursday.

Foreigners net sold 257.5 billion won worth of shares on the Kospi, while individuals offloaded a net 62 billion won. Institutions net bought 317 billion won.

“Investors thought the summit would solve North Korea issues, eventually resulting in resolution of the ‘Korea discount,’ which was the reason that kept the market afloat,” Jeong Yong-taek, an economist at IBK Investment and Securities, said. The Korea discount refers to how much investors undervalue South Korean stocks

“But as the expectations soured, investors increased their net selling. The risks that remained hidden by the historical event were unveiled when the summit was cut short,” he added.

By Jung Min-kyung (mkjung@heraldcorp.com)