Seoul shares rise as Dubai anxiety eases

Seoul shares rebounded yesterday as investors` fears eased on news that Dubai would receive help from surrounding state governments to overcome its debt crisis, which experts say pose a limited exposure on the global financial market.

The Korean stock market closed at its lowest in more than four months on Friday, as news that Dubai World, a Dubai-government investment fund, asked creditors for a debt payment deferment rattled markets across the globe.

The benchmark KOSPI closed 2.04 percent higher yesterday at 1,555.60 points, with banks and builders including Woori Finance leading gains, allowing the market to recoup some of Friday`s losses driven by fears the Dubai debt default could offset another bout of a global-scale financial crisis. The KOSPI index ended at 1,524.50 on Friday, its lowest since July 29.

Volume was moderate at 302.2 million shares, worth 4.5 trillion won ($3.8 billion) with gainers outpacing losers 643 to 169 yesterday.



"If you want to call the unprecedented global financial crisis stoked by the collapse of Lehman Brothers a big earthquake, you can call this Dubai crisis an `aftershock` or an `after tremor,` meaning that Dubai`s debt debacle is not large and serious enough to hurt the fundamentals of the globally linked financial network," Chung Myoung-ji, a market strategist at Samsung Securities, told The Korea Herald. "International financial markets are quickly recovering, including ours and even Europe`s, because investors are now more confident that the Dubai debt problem can be contained at the national level, while the amount linked to European banks is also tame enough for the European governments to step in with state support," he added.

Local market analysts note that Dubai`s money problems involve about $80 billion, with $59 billion worth of the debt linked to Dubai World and another $40 billion to European financial institutions, underlining that Korea has generally steered clear from the development project of Dubai`s artificial palm-shaped islands.

"This means that it is mostly European financial institutions that are most directly affected, rather than Korean banks," Chung stressed. "Korean builders are also little affected," he added.

To further corroborate that the Dubai debt crisis is a passing "cough," Chung highlighted that the stock market is volatile due to psychological factors as opposed to fundamental ones.

"This isn`t really about fundamental money issues, but more of a political one that can be resolved through government intervention, so that`s why our stocks recovered almost half of the losses from Friday," Chung elaborated. "We expect our stocks to continue regaining Friday`s losses in the next few days, should the market fundamentals stay strong."

On Sunday, the United Arab Emirates offered to provide emergency support to banks to ease fears in financial markets. Dubai`s neighboring city-state Abu Dhabi also pledged to provide support. Reports note some analysts criticizing that such move is the "bare minimum they could do."

The Seoul government`s latest pledge to stay vigilant also helped ward off market volatility and restore investor confidence. Vice Finance Minister Hur Kyung-wook said the government would maintain a daily monitoring system until the Dubai debt fiasco was resolved.

"Seoul`s stock market is not exposed to any substantial risks, and last week`s sharp losses were just a temporary drop," Bae Sung-young, a market analyst at Hyundai Securities, told The Korea Herald. "That`s why you saw the shares of our securities firms, financial institutions and construction firms bounce back by an average 3 percent yesterday."

(sohjung@heraldm.com)



By Yoo Soh-jung