North Korea's fresh missile launch has limited impact on local market

South Korea’s financial market on Friday remained relatively unperturbed by North Korea’s launch of another ballistic missile, despite aggravated geopolitical tension on the Korean Peninsula.

Financial decision makers nevertheless vowed for a full readiness posture, lest the continuing military threats from the North dampen investor sentiment in the long-term.

The nation’s benchmark Kospi on Friday closed at 2,386.07, up 8.41 points from the previous day. The secondary Kosdaq closed at 671.3, up 5.89 points. The uptrend came in contrast with the stock market trend on Sept. 4, the day after North Korea’s sixth nuclear test, when the Kospi had dipped 28.04 points.

The US dollar also remained relatively steady, closing at 1,131.7 won, down slightly from 1,132.6 won the day before.

At around 6:57 a.m., the North launched a ballistic missile eastward, marking the first missile launch since the United Nations Security Council adopted a fresh sanctions resolution this week. This was also the first launch since the nuclear-ambitious Kim Jong-un regime carried out its sixth nuclear test on Sept. 3.

“We do not expect any drastic consequences in the market, but are ready to take immediate and stern actions whenever necessary,” Deputy Prime Minister for Economic Affairs and Finance Minister Kim Dong-yeon told reporters Friday.

The top financial policymaker also said that the government is capable of dealing with the situation, as the likelihood of the regime firing another missile had largely been foreseen amid the recently growing tension.

“We shall nevertheless keep up our guard as the North Korean risk has been growing into a long-term global risk,” Kim said.

Earlier in the day, an emergency joint meeting of economic departments was held at Seoul Government Complex under the chairmanship of Deputy Finance Minister Lee Chan-woo.

During the meeting, officials of the Financial Services Commission, Financial Supervisory Service and Korea Center for International Finance agreed that the North’s provocations may act as a persistent concern for the domestic market.

Pledging to continue their joint monitoring of the North Korean situation, they also shared the view that the immediate impact on the market would remain limited.

Market observers also agreed, citing the predictability and repeatability of North Korean missile tests.


“North Korea has already fired 22 missiles so far this year, which has dulled the alertness of the public,” said Kim Dae-jun, an analyst at Korea Investment & Securities.

“The sentiment of fear will not significantly budge unless (the North) strikes upon the US territory of Guam or fires submarine-launched ballistic missiles.”

While agreeing that the missile launch itself may only have a limited impact, some experts asserted that the persistent threats posed by the communist regime should not be taken lightly.

“Taiwan, which usually displays a similar stock price flow (as South Korea), has recently been on an all-time high whereas the Korean stock market has been rather slow,” said Lee Eun-taek, a researcher at KB Securities.

“This shows that the North Korean issue has been delivering a long-term negative impact on Korean stock prices.”

Deputy Prime Minister Kim also partly consented to such a view.

“Considering the strong fundamentals of our economy, there will not be drastic outflows of funds or an aggravation of foreign exchange liquidity,” he said at a meeting of chief economic officials Thursday.

“But we cannot exclude the possibility that the increasing frequency and risk of North Korean provocations may persistently hit the market and discourage investor sentiment.”

By Bae Hyun-jung
(tellme@heraldcorp.com)