August 21, 2012 / 2:41 AM / 5 years ago

Seoul shares edge up, gains capped as ECB keeps up silence

* Foreigners poised for 11th straight buying session
    * Defensives rally as investors rotate into laggards
    * SK Hynix up 3.1 pct on hopes of DRAM price recovery

    By Joonhee Yu
    SEOUL, Aug 21 (Reuters) - Seoul shares nudged higher on
Tuesday morning supported by a market view that the European
Central Bank will indeed tackle the euro zone debt crisis,
although gains were seen capped as investors waited for more
concrete details.
    The Korea Composite Stock Price Index (KOSPI) rose
0.38 percent at 1,953.79 points as of 0142 GMT.
    "It's all quiet on the policy front... the markets will be
consolidating gains until momentum starts clicking into gear
beginning from next week as key events take place," said Kim
Soo-young, an analyst at KB Investment & Securities.
    Expectations that the ECB will step in to ease borrowing
costs for Spain and Italy have taken the KOSPI to a string of
three-month highs in August, until the rally ground to a halt
last Friday. 
    The ECB remained tight-lipped over the method and scale of
its eventual intervention, expected to take place as early as
September, while quashing a report from German magazine Der
Spiegel that the bank was planning to set a cap on bond yields,
above which it would buy government debt issued by member
states.
    Net foreign buying, which has served as a backbone of the
latest rally, persisted on Tuesday with foreigners picking up a
net 138.8 billion won ($122.2 million) worth of shares, setting
g them up for a potential 11-day buying streak.
    Offshore investors have gobbled up more than a net 4.5
trillion won worth of South Korean equities since August 6, but
some analysts have flagged the presence of speculative
short-term buying, or hot money, as a possible cause of
volatility in the market.
    Wary of overheating in blue-chips and high-beta counters,
investors rotated into defensive plays, lifting domestic retail
and telecom shares.
    Retail conglomerate Shinsegae rallied 4.9
percent while SK Telecom, South Korea's largest
mobile service provider, rose 1.7 percent to lead respective
peers.
    Shares in memory chip maker SK Hynix rose 3.1
percent on the back of expectations that DRAM prices could break
their downtrend on the way to stabilization and recovery in the
second half of 2012.
($1 = 1135.5750 Korean won)

 (Editing by Eric Meijer)

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