Korea sees limited impact of NK nuke test on markets, economy

South Korea expects North Korea's alleged nuclear test to have a limited impact on its financial markets and economy if past experience is any guide, the deputy chief of the country's financial regulator said Wednesday.

Jeong Chan-woo, vice chairman of the Financial Services Commission, also said the government will monitor markets around the clock for the time being to cope with any "abnormal signs."

Jeong made the remarks at the start of an emergency meeting of senior financial officials, called after Pyongyang claimed it had conducted a successful test of a hydrogen bomb on Wednesday.

The deputy regulator pointed out that while volatility did increase in the stock and foreign exchange markets right after an artificial tremor was detected, things for the most part got back to normal.

"Even after the North announced that it tested a nuclear device, the financial market remained stable overall," Jeong argued.

Past experience has shown that the impact of North Korea conducting a nuclear test or firing off a long-range missile is generally restricted and does not last long, he said.

The official, however, said that uncertainty surrounding the Chinese market and rising geopolitical risks coming from the Middle East can pose problems for Asia's fourth-largest economy, which requires close attention from policymakers.

"The government will start 24-hour monitoring of market developments and establish case-by-case contingency plans that can be used if the need arises," he said.

Jeong also said that Seoul will share all information about the latest North Korean move and its impact on the South Korean economy, with global credit rating agencies and investors so as to provide them with the latest information.

Related to the North's nuclear test, FSC Chairman Yim Jong-yong said at a separate meeting with local financial sector leaders that the shock of the latest detonation test on Seoul's financial market "will be temporary and limited" if history serves as any guide.

"As the local market is quite accustomed to such an incident after experiencing similar geopolitical risks in the past, today's case would not have big repercussions on the local stock and foreign exchange markets," he said.

"But we will double check our contingency plans to guard against any fallout from the test and to be fully alert for any abnormal signs in the financial sector and real economy," he added.

After a separate meeting, the Bank of Korea too maintained that the negative impact on the local economy from the North's latest nuclear test will be limited.

"There still is a need to carefully monitor any change in the financial and foreign exchange markets as various external risks currently exist, such as the recent stock market rout in China," the central bank said.

"The BOK will continue to maintain a close watch on the local and global financial market, and will take market stabilization measures together with the government should the volatility in the financial and foreign exchange market expand excessively," it added.

News of North Korea's nuclear test sent South Korean stocks falling 0.26 percent and the local currency dipping to a four-month low against the U.S. dollar on Wednesday.

The benchmark Korea Composite Stock Price Index lost 5.1 points to end at 1,925.43. The local currency closed at 1,197.90 won against the U.S. dollar, down 9.9 won from the previous session's close. (Yonhap)