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Seoul shares end down on big-cap losses

After a choppy session, South Korean stocks finished lower on Thursday due to massive blue-chip selling by foreign and institutional investors despite the central bank's unexpected rate cut, analysts said. The South Korean won rose slightly against the U.S. dollar.

The benchmark Korea Composite Stock Price Index (KOSPI) fell 10.24 points, or 0.52 percent, to 1,970.59. Trading volume was moderate at 379.5 million shares worth 6.27 trillion won ($5.57 billion), with gainers beating decliners 480 to 335.

The benchmark index started weak but rose moderately after the Bank of Korea cut the base rate to an all-time low of 1.75 percent, the first cut since October. The central bank's decision, widely seen as giving in to government pressure to spur the economy amid deflation worries, came faster than the market expected, ahead of a U.S. interest rate hike anticipated later this year.

"The Bank of Korea's rate cut came as a surprise and the market considered it as a symbolic move ahead of the Federal Reserve's decision on U.S. interest rates," Ryu Yong-seok, an analyst at Hyundai Securities, said. "The monetary decision is good news for brokerage and construction shares, but its impact on the overall market was subdued today as it coincided with the simultaneous expiration of futures and options."

"The real effect of the rate cut will be more visible in the next session," he said.

Foreign and institutional investors dumped blue-chip shares on this year's first quadruple witching day. "Quadruple witching" refers to the simultaneous expiration of contracts for stock index futures, stock index options, stock options and stock futures, and usually causes volatile trading on the market.

Foreigners and Institutions sold a net 101.1 billion won and 88.4 billion won each, while retail investors bought a net 173 billion won.

Shares of brokerage houses and banks went up after the rate cut announcement. Kiwoom Securities rose 4.25 percent to 66,300 won, and Meritz Securities jumped 5.33 percent to 4,445 won. No. 1 Shinhan Financial Group climbed 2.19 percent to 42,000 won, and its smaller rival, KB Financial Group, advanced 4.09 percent to 38,150 won.

Builders also rallied on hopes that cheaper borrowing costs may encourage more people to buy houses amid rising rental costs.

Hyundai Development went up 3.49 percent to 48,950 won, and Daewoo Engineering & Construction gained 1.62 percent to 7,530 won.

However, leading tech shares traded bearish. Market bellwether Samsung Electronics declined 1.83 percent to 1,447,000 won, and SK hynix, the world's second-largest chipmaker, retreated 0.35 percent to 43,250 won. Naver, the nation's biggest portal operator, edged down 0.32 percent to 627,000 won.

The local currency closed at 1,126.04 won against the greenback, up 0.1 won from the previous session's close, snapping a three-day losing streak. The won dipped to as low as 1,136.40 won shortly after the rate cut announcement but pared earlier losses as investors bet that recent declines were excessive.

Bond prices, which move inversely to yields, ended mixed. The yield on three-year Treasurys shed 1.1 basis points to 1.896 percent, and the return on the benchmark five-year government bonds added 1.2 basis points to 2.021 percent. (Yonhap)
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