Seoul shares down on record oil, unchanged rates
(Updates to mid-morning)
SEOUL, May 9 (Reuters) - Seoul shares dropped after opening higher on Friday, with record oil prices pressuring manufacturers and refiners while disappointment over a central bank decision on Thursday to keep interest rates on hold weighed on financials.
South Korean crude refiners were among the worst performers,
with SK Energy (096770.KS) tumbling 4.31 percent to 111,000 won
after U.S. crude hit a peak of over $124 on Thursday, raising
worries about thinning refining margins.
Financials also suffered on views the Bank of Korea will keep interest rates on hold for the near future and persistent profit worries after a weak set of first quarter results last week.
The Korea Composite Stock Price Index dipped 0.79 percent to 1,833.40 points, down 3.7 percent on the year, but up 19 percent from its mid-March low of 1,537.53 points.
"Disappointment from Thursday's rate hold is eating into recent gains that were made partly due to hopes of a rate cut," said Y.S. Rhoo, a market analyst at Hyundai Securities.
Expectations that the central bank will continue to hold rates steady in June following warnings about inflationary pressure from the Bank of Korea's governor also dampened sentiment, analysts said.
REFINERS FALTER
Shares in South Korea's refiners were struggling, with S-Oil (010950.KS) down 1.61 percent to 67300 won, while GS Holdings (078930.KS) remained flat at 38,900 won.
"Crude has hit an all-time-high, but prices of refined products are not catching up fast enough and refining margins are set to contract further," said Lee Kwang-hoon, an analyst at Goodmorning Shinhan Securities.
Continued weakness in the won currency, which hit a 2-1/2-year low against the dollar on Thursday, will add to refiners' costs as they depend on crude oil imports, Lee added.
Banking shares also led the downward run, with Shinhan Financial Group (055550.KS) falling 2.04 percent to 52,900 won and Woori Finance Holdings (053000.KS) down 1.98 percent to 19,800 won.
Analysts said that in addition to the central bank's rate decision, investors were concerned about the sector's murky earnings outlook.
"Net interest margins are still falling and the relief rally from easing credit market concerns has lost some steam," said Shin Kyu-kwang, an analyst at SK Securities.
"Banks need fresh catalysts to bump up the shares, which we are just not seeing yet," Shin added.
Carmakers such as Hyundai Motor (005380.KS) and Kia Motors (000270.KS) fell on the back of heightened worries that record energy prices may dampen consumer demand for cars.
Hyundai Motor fell 1.23 percent to 88,000 won and Kia Motors declined 1.46 percent to 13,500 won.
(Reporting by Park Jung-youn; Editing by Marie-France Han and Jonathan Hopfner)
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