NK nuke test may have longer impact on market: regulator

The fifth nuclear test by the North Korean regime had a slight impact on the South Korean stock market Friday, but it might affect the market longer than in the past as the North is getting more unpredictable, said the country’s financial regulator.  

The Kospi closed at 2,037.87, down 1.25 percent from Thursday.  

Seoul’s main bourse Kospi opened lower due to disappointment at the inaction of the European Central Bank overnight. It continued to fall below the 2,040 mark throughout the morning as investors here were spooked by the suspicion that North Korea might have conducted another round of nuclear tests.

The country’s economy and financial chiefs convened an emergency meeting in the afternoon to discuss contingency plans against possible financial jitters. But they concluded that the market had not been shaken up yet by the news. 

“The financial market today opened lower mainly due to the ECB’s rate freeze, and didn’t yet seem influenced by the nuclear test news,” said Yim Jong-yong, chairman of the Financial Services Commission.

“The impact of past North Korean nuclear tests were limited, and our markets quickly recovered from the North’s risks,” Yim said. 

In 2013, when the North conducted its fourth test, the South’s financial market shrugged it off, buying more shares and bonds as investors were accustomed to the long-held geopolitical risk.  

But recently, as the Kim Jong-un regime has become more unpredictable, the Korean financial markets have been rattled during times of provocations. The chairman said the North’s unpredictable actions would amplify uncertainty in the market, vowing to strengthen the government’s role of monitoring the market.

“Considering that the latest nuke test might have an impact that remains longer than before, the government and financial authorities will enhance their monitoring on the market,” he said.

The last time the Kospi was hit by the North’s risks was in February when the Kim Jong-un regime launched a long-range ballistic missile in the middle of the Lunar New Year holiday. The Kospi plunged nearly 3 percent at the news, hovering below the 1,900 mark for days. 

In January, when the North claimed it successfully conducted a test on hydrogen atomic bombs, the stock index fell nearly 2 percent. 

“The markets have shown (to have) stabilized so far, but close monitoring is needed,” said Choi Sang-mok, vice finance minister at another meeting Friday. 

“Considering the situation that the North’s missile and nuclear tests are getting bigger in scope, we need some close analysis,” Choi said. “On the economic front, I am concerned about the growing market volatility.” 

On Friday, the selling spree by foreign investors became slightly stronger after the news broke out. They sold 22.2 billion won ($20.1 million) worth of local shares as of 12:30 p.m. Net selling by foreigners stood at 115.2 billion won after the market closed. They bought out 201.7 billion won worth of Korean shares a day before. 

The Korean won lost 6.9 won against the dollar, finishing at 1,097.9 won. Major stock markets in Asia were not showing unusual trends at the news, the FSC said. 

By Song Su-hyun
(song@heraldcorp.com)