S. Korea Stocks Fall to Lowest Since April 2007; Builders Drop

By Kyung Bok Cho and Eunhwan Kim

Aug. 22 (Bloomberg) -- South Korea's Kospi index tumbled to its lowest since April 2007. LG Display Co. fell on concern a cooling global economy will cut demand, while GS Engineering & Construction Corp. led builders lower after government plans to spur the property market failed to impress investors.

LG Display dropped to the lowest since February 2007 after Citigroup Inc. predicted more losses at U.S. banks, triggering concern financial-industry troubles will prolong a global economic slowdown. GS Engineering slid 5.3 percent after Morgan Stanley said housing-market deregulation won't help improve earnings. Brokerages led by Daewoo Securities Co. fell after UBS AG cut its price estimates for some stocks.

``Investor sentiment is souring quickly, and inflow into local funds has dried up, making institutions unable to buy,'' said Kang Shin Woo, who oversees the equivalent of $8 billion as chief investment officer at Korea Investment Trust Management Co. in Seoul. ``People are selling construction stocks out of disappointment about the housing-market measures. There's a lack of confidence in government policy.''

The Kospi fell 15.68, or 1 percent, to close at 1,496.91 in Seoul. The measure dropped every day this week, capping a 4.8 percent decline.

LG Display, the world's second-largest maker of liquid- crystal displays, lost 600 won, or 2.1 percent, to 27,900, the lowest since Feb. 5, 2007. Hyundai Motor Co., which ships three out of five of its cars overseas, retreated 700 won, or 1 percent, to 69,300, the lowest since Aug. 4.

Builders Fall

Citigroup analyst Prashant Bhatia said yesterday that Goldman Sachs Group Inc., Morgan Stanley and Lehman Brothers Holdings Inc. will write down a combined $6.4 billion during the third quarter.

Losses at financial institutions in the world's largest economy have triggered a contraction of credit, contributing to the slowdown of economies across the globe. Exports account for two-fifths of South Korea's economy.

Hyundai Development Co., which gets more than half of its sales from residential homes, retreated 1,050 won, or 2.3 percent, to 44,300, the lowest since Aug. 7. GS Engineering, the nation's fourth-largest builder, declined 5,300 won, or 5.3 percent, to 94,700, the lowest since Aug. 5.

There are ``more downside risks'' to construction companies' earnings in the second half despite government plans for stimulating the property market that were announced yesterday, Morgan Stanley said in a report. ``We do not believe the government's deregulation effort will be able to turn fundamentals around in the next six to nine months,'' the brokerage said.

Daewoo Securities, South Korea's third-biggest brokerage by market value, lost 400 won, or 2.3 percent to 16,950, the lowest since Aug. 5. Samsung Securities Co., the largest, fell 900 won, or 1.4 percent, to 61,400, the lowest since Aug. 4.

Insurers Fall

UBS AG cut its price estimates for Daewoo Securities, Samsung Securities and Woori Investment & Securities Co., in a report. The industry faces ``macro headwinds'' and a ``challenging'' business environment, the brokerage said.

Woori Investment, South Korea's fourth-largest brokerage by market value, dropped 550 won, or 2.7 percent, to 19,750, the lowest since Aug. 5. Separately, the company said yesterday its July profit tumbled 92 percent from a year earlier to 5 billion won.

The following were among the most-active stocks in South Korean markets.

Companies affected by fuel prices: Korean Air Lines Co., (003490 KS), the nation's biggest carrier, fell 650 won, to 1.6 percent, to 41,150, the lowest since July 15. Hanjin Shipping Co. (000700 KS), the largest South Korean shipping line, slid 850 won, or 2.8 percent, to 29,900, the lowest since Feb. 5, 2007.

Crude oil gained 4.9 percent to $121.18 a barrel yesterday in New York, the biggest increase since June 6. It recently rose further to $121.62 in after-hours trading.

Ssangyong Motor Co. (003620 KS), which got about two-thirds of last year's sales from sport-utility vehicles, slid 60 won, or 2.2 percent, to 2,700, the lowest since Jul 9.

Insurers: Samsung Fire & Marine Insurance Co. (000810 KS), South Korea's biggest insurer by market value, dropped 6,500 won, or 3.2 percent, to 197,500, the most since July 21. Hyundai Marine & Fire Insurance Co. (001450 KS), the third-largest, slipped 1,600 won, or 8.4 percent, to 17,500, the most since Jan. 20, 2006.

BNP Paribas SA cut its recommendations for Samsung Fire and Hyundai Marine to ``hold,'' from ``buy,'' in a report today. ``We believe insurers are entering a down-cycle of auto insurance underwriting,'' the brokerage said. It also cut its price estimates for LIG Insurance Co. (002550 KS) and Meritz Fire & Marine Insurance Co. (000060 KS).

LIG fell 1,800 won, or 8.3 percent, to 19,850, the lowest since April 23. Meritz Fire retreated 290 won, or 3 percent, to 9,250, the lowest since July 22.

Telecommunication companies: KT Corp. (030200 KS), South Korea's largest phone and Internet company, climbed 1,050 won, or 2.6 percent, to 42,250, the most since Aug. 4. KT Freetel Co. (032390 KS), the second-largest South Korean wireless service provider, added 350 won, or 1.3 percent, to 26,850, the highest since Aug. 6.

South Korea will review ways to help telecom companies reduce their marketing expenses, Woori Investment & Securities Co. said in a report. The news ``will help the market gain confidence marketing costs will come down,'' the brokerage said.

Daewoo Shipbuilding & Marine Engineering Co. (042660 KS), the world's third-largest maker of ships, rose 300 won, or 0.8 percent, to 36,200, gaining for the first time in five days. Kuwait Oil Tanker Co. S.A.K., a unit of state-owned Kuwait Petroleum Corp., said yesterday it signed a $708 million contract with Daewoo Shipbuilding for four crude carriers.

DC Chemical Co. (010060 KS), a maker of petrochemicals and solar-power components, added 3,000 won, or 1 percent, to 318,000, rising for the first time in six days. The company said it received a 169.2 billion won ($160.6 million) polysilicon order from Motech Industries Inc. of Taiwan.

Kyobo Securities Co. (030610 KS), a brokerage, retreated 450 won, or 3.6 percent, to 12,150, the lowest since April 23, 2007. The company said yesterday its July net income plunged 82 percent from a year earlier to 2.28 billion won.

GS Holdings Corp. (078930 KS), which operates the nation's second-biggest oil refiner, dropped 1,150 won, or 3.6 percent, to 31,250, the lowest since March 6, 2007. Goldman, Sachs & Co. cut its recommendation to ``sell,'' from ``buy,'' in a report, citing ``significant headwinds'' to refining margins and GS's plans to bid for Daewoo Shipbuilding & Marine Engineering Co.

Maniker Co. (027740 KS), South Korea's second-largest poultry processor, gained 50 won, or 7.2 percent, to 745, the most since June 13. Maniker will report record operating profit in the third quarter, benefiting from higher chicken prices and declining corn costs, SK Securities Co. said in a report.

To contact the reporter for this story: Kyung Bok Cho in Seoul at kcho7@bloomberg.net; Eunhwan Kim in Seoul at ekim65@bloomberg.net.