S.Korean stocks hit over 5-month high on foreign buying, won extends gains

Wed May 14, 2014 10:47pm EDT

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* KOSPI underpinned by robust foreign net buying
    * Won inches up amid intervention caution

    SEOUL, May 15 (Reuters) - South Korean shares hit their
highest levels in more than five month highs on foreign buying,
but gains were capped by profit taking following a five-day
rally, while the won firmed on robust capital inflows.
    The Korea Composite Stock Price Index (KOSPI) was up
0.1 percent at 2,011.97 points as of 0235 GMT after hitting as
high as 2,015.37, the strongest level since Dec. 3, 2013.
    "The market is simply catching some breath after a run, but
market sentiment hasn't been harmed as foreigners robustly
purchase in spot and futures markets," said E-Trade Investment
analyst Choi Kwang-hyeok.
    According to the bourse operator Korea Exchange, foreign
investors bought a net 1.4 trillion won worth of KOSPI 200
futures contracts on Wednesday, the largest amount since May 9,
2013.
    Foreign investors had purchased a net 156.5 billion won
($152.3 million) worth of KOSPI shares by late morning, after
buying a net 559.3 billion won in the previous two sessions.
    "The market should extend its gains from this run, although
there will be some downside pressures to manage the pace," added
Choi.
    The main bourse has risen 3.6 percent in the previous five
sessions to its highest closing level since Dec. 30, 2013 on
Wednesday.
    The winning streak lifted the 14-day relative strength index
to 73.4. Stocks are deemed "overbought" above the 70-mark, which
tends to signal a reversal in the near-term.
    Profit taking brought down state-run utilities company Korea
Gas Corp and cosmetics company Amorepacific Corp 1.4
percent and 3.1 percent, respectively.
    In the foreign exchange market, the won was
quoted at 1,026.6 per dollar as of 0235 GMT, up 0.1 percent from
Wednesday's onshore close at 1,027.9.
    The won has risen 3.7 percent this quarter and breached the
strongest level in almost six years.
    Local foreign exchange authorities, however, have been wary
of the rapid pace of appreciation, and were suspected of
purchasing dollars to curb its strength on Wednesday.
    "The authorities will not back off easily as they robustly
defended the won yesterday," a foreign bank currency dealer
said.
    Meanwhile, June futures on three-year treasury bonds 
rose 0.09 points at 106.02, buoyed by expectations of credit
easing by the European Central Bank.
    Reuters on Wednesday quoted sources as saying the European
Central Bank is preparing a package of policy options for its
June meeting, including cuts in all its interest rats and
targeted measure aimed at boosting lending to small- and
med-zied firms(SMEs). 
    
                       0235 GMT    Prev close
 Dollar/won            1,026.6       1,027.9
 Yen/won              10.07/08       10.0824
 *KTB futures           106.02        105.92
 KOSPI                2,011.97      2,010.83
 * Front-month futures on three-year treasury bonds
($1 = 1027.7500 Korean Won)

 (Reporting by Jungmin Jang; Additional reporting by KyoungHo
Lee; Editing by Kim Coghill)
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