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(LEAD) Korean Air ends lower on poor earnings, uncertainties

All Headlines 16:38 August 16, 2019

(ATTN: CHANGES headline and lead; UPDATES stock prices in 2nd para; ADDS analyst comment in 4th para)
By Choi Kyong-ae

SEOUL, Aug. 16 (Yonhap) -- Korean Air Lines Co. on Friday closed down after touching a 52-week low after it posted worse-than-expected second-quarter earnings amid an unfriendly business environment.

In Friday's session, shares of Korean Air fell 0.2 percent to 22,850 won, roughly in line with the broader KOSPI's 0.6-percent loss.

Immediately after the market opening, South Korea's national flag carrier plunged by 5.2 percent to a 21,700 won but the stock rebounded in afternoon trading.

"Investors turned to buy Korean Air stocks as they view it as an undervalued stock. The won's gain against the dollar also relieved investor sentiment despite concerns involving Japan's export curbs and lower freight demand," Mirae Asset Daewoo analyst Ryu Je-hyun said by phone.

The Korean won rose 0.2 percent to 1,210.80 won to the U.S. dollar on Friday.

This undated photo shows a Korean Air B787-9 passenger jet. (Yonhap)

On Wednesday, the country's national flag carrier said its second-quarter loss widened from a year earlier. Net losses deepened to 396.3 billion won in the second quarter from 304.7 billion won a year earlier.

The won's weakness against the U.S. dollar drove up fuel purchasing costs and the value of dollar-denominated debts. The ongoing U.S.-China trade war drove down demand in the cargo delivery business, also eating into the quarterly bottom line, the airline said.

A nationwide anti-Japan campaign here amid a trade row with the neighbor and China's unexpected announcement that it won't accept applications for new and additional flights from foreign airlines for two months through Oct. 10 will further weigh on Korean Air stocks, analysts said.

In early July, Japan restricted exports of three high-tech materials used in chips and display panels in apparent retaliation against a series of South Korean court rulings last year over Japan's wartime forced labor.

Early this month, it officially excluded Korea from its "whitelist" of trusted trading partners that enjoy fast-track export clearance.

"Korean Air is likely to continue to report disappointing earnings results for the rest of the year due to a nationwide boycott on Japanese goods and travel to the country, coupled with a slowing economy and a weak won," Lee Jeong-eun, an analyst at Korea Investment & Securities Co., said.

The brokerage lowered its 12-month target price to 33,000 won from 39,000 won to reflect uncertainties ahead.


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