Seoul, Oct 8: South Korean stocks extended their decline for a third straight session on Thursday as rising oil prices heightened concerns over inflation and the possibility of higher interest rates. Technology shares led the sell-off, while the South Korean won strengthened slightly against the US dollar.
The benchmark Kospi opened 0.07 per cent higher but quickly lost momentum before ending the session 177.97 points, or 2.62 per cent, lower at 6,625.93.
The decline came against a weak backdrop on Wall Street. The Dow Jones Industrial Average fell 0.66 per cent in the previous session, while the tech-heavy Nasdaq Composite slipped 0.22 per cent.
Oil Prices Add to Inflation Concerns
Investor sentiment remained cautious as higher oil prices raised fears that inflation could prove more persistent. Market participants are also assessing the potential impact on monetary policy after signals from the US Federal Reserve that further rate increases could be required if inflation remains elevated.
Higher interest rates can weigh on equity valuations, particularly technology stocks, as investors reassess the value of future corporate earnings.
Technology Stocks Lead the Decline
Technology companies were among the biggest losers in Seoul.
Samsung Electronics declined 2.42 per cent to 262,000 won, while SK hynix fell 2.44 per cent to 1.68 million won.
Other major stocks also came under pressure. Defence company Hanwha Aerospace dropped 8.33 per cent to 891,000 won, while shipping major HMM declined 2.8 per cent to 20,800 won.
However, the broader market was not uniformly weak. Battery stocks bucked the trend, with Samsung SDI rising 1.25 per cent to 569,000 won and LG Energy Solution gaining 2.56 per cent to 401,000 won.
Foreign and Institutional Selling Weighs on Market
Selling by major market participants added to the pressure. Institutions sold a net 1.7 trillion won, while foreign investors offloaded about 2 trillion won worth of shares. Retail investors, meanwhile, remained buyers, purchasing a net 2.9 billion won in stocks.
The selling pattern highlights the cautious mood among larger investors as markets contend with uncertainty around oil prices, inflation and interest rates.
Won Strengthens, Bond Yields Rise
The South Korean won strengthened 1.9 won from the previous session to close at 1,338.5 against the US dollar as of 3:30 p.m.
South Korean government bond prices also declined, pushing yields higher. The yield on three-year government bonds rose 2.2 basis points to 3.98 per cent, while the benchmark five-year yield increased 2.4 basis points to 4.16 per cent.
The combination of higher oil prices, rising bond yields and expectations of tighter monetary policy is likely to keep investors cautious in the near term.
For South Korean equities, the next few sessions could be important as investors assess whether the recent correction is temporary or signals a broader shift in market sentiment.