SEOUL, KOREA - Shares in South Korea's Hyundai Motor fell on Monday as investors worried the United States may harden its stance on car trade and on talk, denied by Hyundai, that it may target parts of money-losing Chrysler.
Hyundai, the country's 10th biggest company in market value and the world's No. 5 car maker along with affiliate Kia Motors Corp , dived as much as 8.4% on Monday before stabilising a little. The shares were down 5.1% at 51,800 won(S$56.98) by 0239 GMT.
Analysts said U.S. President-elect Barack Obama's focus on the importance of helping the U.S. auto industry may have spooked investors.
Obama, who has said he opposes a 2007 free-trade deal with South Korea unless it is renegotiated to grant greater access to the Asian market for U.S. automakers, said on Friday federal help for the distressed auto industry was a "high priority".
"Obama's comments on the auto industry put pressure on Hyundai," said Choi Dae-sik, an analyst at HI Investment & Securities. "Although today's fall looks excessive as we don't know what exactly Obama would do."
U.S. politicians meanwhile made fresh calls at the weekend for the Bush administration to use a recently launched $700 billion corporate bailout programme to rescue General Motors Corp , Ford Motor Co and Chrysler LLC with desperately needed cash.
"Over the weekend we've had a pretty staunch show of support towards the auto industry by U.S. law makers, and this has deepened worries about where trade relations with the U.S. are headed," said Lee Sang-hyun, analyst, Hana Daetoo Securities.
The Bush administration, which recently rebuffed a request for capital from GM to help facilitate a possible merger with Chrysler, has not decided whether it will - or can, by law - expand the bailout initiative beyond banks and other financial services firms.
GM, Ford and Chrysler are burning through cash at a rapid rate and are seeking at least $25 billion in immediate federal loans to help them survive.
Further weakening investor confidence in Hyundai were reports, denied by the South Korean carmaker, that it had talks with Chrysler LLC owner Cerberus Capital Management about a potential acquisition of the U.S. automaker's Jeep brand and possibly other assets
However: "Chrysler is not the main factor pushing down Hyundai's shares today," said HI's Choi. "Hyundai has nothing positive to gain with a purchase of Chrysler."
Hyundai on Saturday said it had no capacity for a new acquisition as it is focused on completing construction of several overseas plants.
"Even though Hyundai officially denied the (Chrysler) report, the news is being is being overplayed in shares," said Yoon Tae-sik, an analyst at Dongbu Securities.
(Additional reporting by Park Ju-min; writing by Marie-France Han; Editing by Keiron Henderson)
