SEOUL (Reuters) - Seoul shares slipped 0.1 percent on Monday, with the sinking of a South Korean naval ship weighing on sentiment, but continued foreign buying and rises in key technology and auto blue chips lent the market support.
Analysts played down the impact of naval ship incident, as Seoul stocks posted minor losses and as U.S. share reaction to the news was also short-lived.
“Investors appeared to have concluded that the naval ship sinking was not related to North Korea...unless we see drastic developments in the North, such as the crumbing of the current political hierarchy, the market will remain stable,” said Chung Myoung-gi, a market analyst at Samsung Securities.
On Saturday, South Korea all but ruled out the likelihood that North Korea was involved in the sinking of one of its navy vessels near their disputed border.
“Investors will be more focused on key U.S. manufacturing and job data due out later this week, and whether the market posts gains in the coming sessions to hit its earlier high will depend on how that comes out,” Chung added.
Analysts said the market was also helped by news that euro zone leaders won muted approval from financial markets on Friday for a “band aid” agreement to create a safety net for debt-ridden Greece.
The Korea Composite Stock Price Index .KS11 (KOSPI) was down 0.11 percent at 1,695.88 points as of 0146 GMT, just shy of the psychologically significant 1,700 point level.
Shares in defense issues jumped after earlier reports that the North may have been involved with the naval ship incident.
“The broader market is obviously shrugging off the naval ship incident...but it seems some retail investors are making bets on individual issues that are North Korea-sensitive,” said Y.S. Rhoo, a market analyst at Hyundai Securities, while adding the movements were likely to be short-lived.
Shares in military equipment maker Victek (065450.KQ), a marker of military equipment parts, rose 5.04 percent and Huneed Technology (005870.KS), a manufacturer of wireless communications equipment for military purposes, jumped 7.28 percent.
But inter-Korea cooperation issues fell, with Romanson (026040.KQ), a watchmaker that has a production unit in the Kaesong industrial park in North Korea, shedding 3.15 percent and Kwangmyung Electric Engineering Co Ltd (017040.KS) losing 5.49 percent.
Automakers rose as the won turned weaker against the dollar.