South Korea's Kospi Gains Most in a Year, Led by Woori Finance

By Saeromi Shin and Kyung Bok Cho

Sept. 8 (Bloomberg) -- South Korea's Kospi index rose the most in more than a year, led by Woori Finance Holdings Co., on speculation the U.S. government's takeover of Fannie Mae and Freddie Mac will stabilize financial markets.

Woori, which has the most U.S. mortgage-related investments among South Korean banks, jumped by the daily limit on speculation related losses will decline. Industrial Bank of Korea climbed 8.9 percent after credit risks decreased. Stocks also rose after a gain in the won eased concerns that foreign investors will pull out of Korean holdings when $6.7 billion in government bonds mature this month.

``Support by the U.S. government, which came earlier than expected at a politically sensitive time, reduces concerns about the global financial sector,'' said Im Jeong Jae, a fund manager at Shinhan BNP Paribas Investment Trust Management Co. in Seoul, which has the equivalent of $825 million in equities. ``Local investors realize foreigners are less likely to leave after the government bonds mature this month.''

The Kospi rose 74.76, or 5.3 percent, to 1,479.14 as of 2:18 p.m. in Seoul, the most since Aug. 20, 2007, when it gained 5.7 percent. All but three of the benchmark's 19 industry groups advanced.

Program trading of Kospi-listed shares was halted according to exchange rules for 5 minutes from 1:35 p.m. after Kospi 200 futures gained more than 5 percent for more than 1 minute.

Woori rose 15 percent to 15,050 won, a record jump. Industrial Bank, the nation's largest lender to smaller businesses, gained 8.9 percent to 16,450 won, the most since July 21.

The Kospi's Financial Industry index, which advanced 8.4 percent, was the biggest contributor to the broader gauge's climb.

Strengthening Won

Fannie and Freddie, which make up almost half the U.S. home- loan market, were taken over after the biggest surge in mortgage defaults in at least three decades, Treasury Secretary Henry Paulson said yesterday in Washington. Investors had worried failures by the companies, which hold more than $1.5 trillion in assets and almost the same amount of debt, would spark further losses at financial institutions.

The Markit iTraxx Asia index, a gauge of credit risk, fell 17 basis points to 157.5, according to prices from ICAP Plc. A basis point, or 0.01 percentage point, is worth $1,000 on a swap that protects $10 million of debt from default.

Samsung Electronics Co., South Korea's biggest company by market value, advanced 5.8 percent to 550,000, in its steepest climb since July 13, 2007. LG Electronics Inc., Asia's second- largest handset maker, added 6.2 percent to 100,500 won, the most since March 5.

The won gained 2.4 percent to 1,090.50 to the dollar as of 2 p.m., according to Seoul Money Brokerage Services Ltd. About $6.7 billion in government debt held by overseas investors is set to mature this month, triggering concern that capital outflows will further drive down the won, Asia's worst performing currency this year.

Separately, Samsung's possible acquisition of SanDisk Corp. could be ``strategically positive'' as it will reduce earnings volatility in the company's NAND flash business and save royalty payments, Goldman, Sachs & Co. said in a report.

To contact the reporter on this story: Saeromi Shin in Seoul at sshin15@bloomberg.net; Kyung Bok Cho in Seoul at kcho7@bloomberg.net.