Seoul shares extend falls after rate hike decision

(Updates to midday)

By Park Jung-youn

SEOUL, Aug 7 (Reuters) - Seoul shares extended their losses
on Thursday shortly after the Bank of Korea decided to raise the
benchmark interest rate by 25 basis points, pressuring financials
and battered construction issues.

The Korea Composite Stock Price Index was down 0.64
percent at 1,568.60 points as of 0132 GMT, after opening flat.
The benchmark index had lost more than 1 percent at its session
low of 1,561.98.

"A rate hike decision generally triggers a negative response
from stock investors, and that was the case today," said Juhn
Chong-kyu, a market analyst at Samsung Securities.

"However a hike was more or less expected, and I think the
impact from the central bank's decision will not likely last
beyond today," he added.

South Korea's central bank raised interest rates Thursday for
the first time in a year to a 7-½ year high of 5.25 percent, as
expected, but analysts said the rise could mark the end of a
three-year tightening cycle.[ID:nSEO294060]

The rate decision sent financials lower, with shares in Woori
Finance Holdings (053000.KS) falling 4.28 percent to 15,650 won
and Hana Financial Group (086790.KS) shedding 2.22 percent to
39,550 won.

It also hit South Korean construction firms hard, with
Hyundai Engineering & Construction (000720.KS) down 2.65 percent
to 62,450 won and Samsung Engineering (028050.KS) down 2.84
percent to 71,900 won. Daewoo Engineering & Construction
(047040.KS) dropped 2.71 percent to 12,550 won.

"The rate hike is really the last thing the builders need in
times like this. There will be even less appetite for unsold
apartments now that the cost of loans will be heavier, and
builders themselves will have to pay heavier interest fees on
financing they received," said Paul Song, an analyst at Daewoo
Securities.