SEOUL STOCK MARKET CONSOLIDATES ON STATE MEASURES
The South Korean stock market seems to be
consolidating following government measures to cool its rapid
rise this year, domestic and foreign analysts said.
    The composite index hit a record 405.13 early last week,
nearly 50 pct up from the New Year when it stood at 264.82, but
plunged to a 383.48 close on April 3, the day after the
government intervened.
    Under the measures, industrial firms with bank loans worth
50 billion won or more must either offer new shares or issue
convertible bonds to repay the loans.
    Securities houses will have to sell shares they are holding
if the volume exceeds 40 pct of their paid-in capital. The
ceiling for investment trust firms was fixed at 50 pct.
    South Korean firms have traditionally preferred obtaining
low interest bank loans -- the current rate is 10 pct -- to
issuing bonds at a higher rate or floating share issues with
the attendant dividend pressures and launch expenses.
    The Seoul Stock Exchange, with 355 listed stocks, grew
explosively in the first three months of the year, building on
an already impressive 68.9 pct gain in 1986.
    Analysts now expect the market to pause temporarily and
then resume its upward movement, despite the indirect
government regulation.
    They said the continuous growth of the nation's gross
national product (GNP) and trade surplus, improved exports and
good performances by industrial firms all fuelled the boom.
    The trade surplus widened to 460 mln dlrs in March from 110
mln in February, while government economists expect GNP to grow
nine pct this year.
    Analysts said the deep slump in the real estate market also
increased liquidity in the stock market.
    "Many investors are still confident the market will not lose
its strength. It seems likely to pause for a while and then
rebound again," said Park Sin-bom, a director of Lucky
Securities Co.
    "There are more positive factors than negative. The market
is still buoyed by ample liquidity thanks to the economy's
strong performance."
    The stock market began to recover during Saturday's
half-day session with the index closing at 397.24 in active
trading on Monday, but closed lower on Tuesday at 390.24 on
turnover of 76 billion won.
    "I would say the market is flat for the time being.... It is
very prone to profit-taking after the sharp gains in the first
three months and the various government measures," a foreign
analyst said.
    "But the market will head up again after a rest because the
fundamentals are expected to rise and investors will be as
bullish as ever at the slightest sign of a market recovery."
    He added that the newly launched 30 mln dlr Korea Europe
Fund would have an impact on the South Korean stock market,
despite its small volume compared with the 5.72 trillion won of
listed capital on the Seoul exchange.
    Local dealers recommend blue chips and financial shares as
these stand to benefit most from continuing trade friction
between the United States and Japan and the rumoured
restructuring of local finance houses.
    Dealers also cite the shares of domestically oriented
firms, which are less vulnerable to the effects of the gradual
appreciation of the won.
 REUTER
