Korea Gas Corp. (036460) retreated the most in more than three months in Seoul trading after the government announced a plan to keep gas prices unchanged in July. The stock fell 4.8 percent to 37,000 won on the Korea Exchange, the biggest decline since March 14. Korea’s benchmark Kospi stock index rose 0.3 percent. The Knowledge Economy Ministry said the price freeze was in response to rising inflationary pressure. Korea Gas sought a 5.6 percent increase in tariffs for the July-August period as the cost of importing liquefied natural gas climbed, according to an e-mailed statement from the ministry today. “The unexpected decision is affecting investment sentiment for the stock,” said Shin Ji Yoon, an analyst at KTB Securities Co. in Seoul, who has a “buy” recommendation on Korea Gas. “It’s different from what everyone expects and the government earlier said. Still, the reaction looks excessive.” The decision will have limited impact on Korea Gas’s earnings because the government will make up by adjusting tariffs later, he said. The government, which owns 51 percent of Kogas, as the company is known, annually sets the margin for selling fuel based on forecast sales to cover import costs. The freeze would increase the amount to be recouped through tariff increases by 78.4 billion won ($73 million), according to the ministry. The government will allow Korea Gas to adjust rates gradually, depending on global crude prices and currency movements, the ministry said. The government today increased its consumer inflation target rate for this year to 4 percent from the previous projection of 3 percent. To contact the reporters on this story: Sangim Han in Seoul at sihan@bloomberg.net; Saeromi Shin in Seoul at sshin15@bloomberg.net To contact the editor responsible for this story: Amit Prakash at aprakash1@bloomberg.net

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