Seoul shares drop 0.96 pct on stalled U.S. debt talks

(ATTN: ADDS bond yields at bottom)
SEOUL, July 25 (Yonhap) -- South Korean stocks closed 0.96 percent lower on Monday as investors were jittery about stalled talks over a U.S. debt ceiling, analysts said. The local currency fell against the U.S. dollar.
The benchmark Korea Composite Stock Price Index (KOSPI) fell 20.75 points to 2,150.48. Trading volume was moderate at 388.1 million shares worth 5.81 trillion won (US$5.51 billion) with losers outpacing gainers 489 to 335.
"After Greece's debt crisis showed some signs of easing, investors are focusing on how the U.S. debt talks will unfold," said Kwak Joong-bo, a market analyst at Samsung Securities Co.
Uncertainty persists as the talks over raising a U.S. debt limit have been in a stalemate, raising fears that the world's largest economy may default on its debt.
"If an agreement to raise the U.S. debt limit cannot be reached by the Aug. 2 deadline, global financial markets would be in dismay and the U.S. recovery will be dented," said Park Sang-hyun, a senior economist at Hi Investment & Securities Co.
"Optimism about a potential agreement is high, but an unexpected delay is likely to jack up raw material prices and raise currency volatility," Park added.
Foreign investors dumped a net 64.4 billion won worth of local stocks on the main stock market.
Tech, bank and construction shares led the market's bearish mode. Market leader Samsung Electronics shed 0.35 percent to 847,000 won, and flat panel giant LG Display lost 1.87 percent to 28,900 won.
Top financial services company KB Financial Group fell 1.28 percent to 53,900 won, and its rival Shinhan Financial lost 2.65 percent to 51,500 won.
But No. 2 car maker Kia Motors rose 1.29 percent to 78,300 won on a report that its management and labor union agreed on Friday to hike the base pay by 5.17 percent, ending their annual negotiations without a strike for the second year in a row.
The local currency ended at 1,056.20 won to the dollar, down 4.30 won from Friday's close as importers snapped up the greenback for month-end settlements, dealers said.
Bond prices, which move inversely to yields, closed lower. The yield on three-year Treasuries added 0.03 percentage point to 3.82 percent and the return on the benchmark five-year government bonds rose 0.02 percentage point to 4 percent.
sooyeon@yna.co.kr