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Roundup: S.Korean shares drop on concerns over U.S. rate hike

Xinhua, May 27, 2015 Adjust font size:

South Korean shares ended sharply lower Wednesday as concerns spread over interest rate increase in the United States after U.S. Federal Reserve Chair Janet Yellen indicated the first rate hike within this year.

The benchmark Korea Composite Stock Price Index (KOSPI) plunged 36.00 points, or 1.68 percent, to 2,107.50 at the close. Trading volume stood at 434.1 million shares worth 7.89 trillion won (7.14 billion U.S. dollars).

Yellen said in a speech in Rhode Island last Friday that "it will be appropriate at some point this year to take the initial step to raise the federal funds rate," suggesting the first rate hike from near zero since the 2008 financial crisis.

Her comments led to the ascent of the U.S. dollar to major currencies, interpreting the Fed's rate hike this year as a foregone conclusion. Many market watchers predicted the Fed's first rate increase in September this year.

U.S. stocks lost ground overnight, leading foreigners in the local stock market to turn into net sellers. Foreigners reduced their holdings of local stocks by 223 billion won.

Institutional investors dumped shares worth 203 billion won, but retail investors purchased a net 423 billion won worth of shares.

Market watchers forecast that the Fed's rate hike issue would increase market volatility for the time being though the rate increase within this year has been expected.

Large-cap shares lost ground. Market bellwether Samsung Electronics declined 3.5 percent, and top steelmaker POSCO slid 2. 8 percent. The state-run power supplier Korea Electric Power Corp. retreated 2.7 percent, and major banking group Shinhan Financial Group tumbled 3.8 percent.

The South Korean currency finished at 1,105.5 won against the greenback, down 4.5 won from Tuesday's close.

Bond prices ended higher. Yields on the liquid three-year treasury notes fell 3.7 basis points to 1.809 percent, and the return on the benchmark 10-year government bonds declined 4.2 basis points to 2.447 percent. Endi