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http://www.reuters.com/article/idUSTOE64O01X20100525

Seoul shares fall 3 pct as N.Korea tensions weigh
Mon May 24, 2010 10:39pm EDT

* KOSPI hits 15-week low amid foreign selling

By Jungyoun Park

SEOUL, May 25 (Reuters) - Seoul shares extended losses to more than 3 percent on Tuesday as North Korea tensions worsened and renewed euro zone worries pressured investor sentiment, sending key blue chips such as Hyundai Motor (005380.KS) lower.

The Korea Composite Stock Price Index (KOSPI) was down 3.31 percent at 1,551.74 points as of 0208 GMT, after falling to as low as 1,549.32 points, the lowest level seen since early February.

"Heightened North Korea tensions, at a time when the euro zone fears already exist, are further fueling negative sentiment," said Bae Sung-young, a market analyst at Hyundai Securities.

"However so far, there have not been major negative responses such as ratings downgrades due to South Korea's geopolitical issues. Unless we see further drastic action by the North, such as a missile launch, market reaction is not likely to be lasting or dramatic," Bae added.

North Korean leader Kim Jong-il has ordered his military to be on a combat footing, South Korea's Yonhap news agency said on Tuesday.[ID:nSEW002195]

South Korea on Monday announced steps to tighten the vice on the North's already stumbling economy in punishment for sinking one of its navy ships, and both sides intensified war-like rhetoric. [ID:nTOE64N00Y]

Foreign investors offloaded 119.4 billion won ($98.37 million) worth of stocks, poised to sell Seoul shares for a seventh consecutive session.

Shares in automakers lost ground as investors moved to lock in profits.

Hyundai Motor dropped 5.42 percent to 131,000 won and Kia Motors (000270.KS) declined 5.5 percent to 27,500 won.

"Falls are largely due to portfolio re-adjustments as investors seek to secure shares' gains on the year. They rallied substantially in April and earlier this month," said Kim Byung-kook, an analyst at Daishin Securities.

Hyundai Motor shares had gained nearly 15 percent on the year and Kia Motors 45 percent as of Monday's close, versus the broader market's 4.6 percent fall.

"Also Kia's exposure to Europe is substantial, and given the euro zone's current financial issues, sentiment toward its shares is weak," Kim added.

Airlines and tour issues also tumbled after the won KRW= fell 4.5 percent against the dollar on Tuesday, prompting concerns a weaker domestic currency may curb appetite for overseas travel.

Shares in Korean Air Line (003490.KS) fell 5.53 percent and Asiana Airlines (020560.KS) plunged 10.14 percent.

Major tour agency Hana Tour (039130.KQ) lost 6.26 percent, and Modetour (080160.KQ) shed 9.61 percent.

(Editing by Jonathan Hopfner)