N. Korean attack unlikely to dent financial markets

SEOUL, Nov. 23 (Yonhap) -- North Korea's firing of dozens of artillery shells at
a South Korean island may spook market investors, but its impact on the local
financial markets are likely to be limited, analysts said Tuesday.
Earlier in the day, the North fired artillery shells at Yeonpyeong Island, off
the west coast of the Korean Peninsula near a disputed maritime border. South
Korea's military said one marine had been killed with three others seriously
wounded in the shelling, the biggest attack in years.
On the news, South Korean shares dropped with the country's key stock index, the
KOSPI, sinking 15.40 points to close at 1,928.94.
The Korean currency ended at 1,137.5 won to the U.S. dollar, down 11.8 won from
Monday's close.
The KOSPI 200 Dec. futures index lost 6.2 points, or 2.44 percent, to 248.0. The
three-year bond futures also slipped 0.2 percent to 112.05, the most since Nov.
5.
On the New York non-deliverable forward market, the Korean currency surged to the
1,180 won range against the greenback as a result of the North's artillery
attack.
Heightened geopolitical risks also forced the country's central bank to hold an
emergency meeting of senior officials later in the day to assess the possible
market impact.
"This is definitely bad news, and the market will open lower tomorrow," said Won
Sang-phil, an analyst at Tong Yang Investment Banking Corp. "But at the same
time, the impact would be curbed as investors bet the situation would not worsen
further."
Choi Chang-kyu, an analyst at Woori Investment & Securities, also echoed such a
sentiment, saying foreign investors would not be swayed by the provocation.
"In the past, the financial markets showed resilience by returning to normal,
even after they were affected for one or two days by news the North conducted
nuclear tests or launched missiles," Choi said.
North Korea-related risks are a major reason for what is called the "Korea
discount" in local financial markets as foreign investors worry that soured
inter-Korean relations could affect their investments here.
Even after the North's long-range missile test on April 5 last year, the local
stock market ended higher the following day. On May 25 of the same year, the
communist country conducted a nuclear test, sending South Korea's benchmark index
sharply lower, but it managed to recoup most of the losses during the day,
inching down only 0.2 percent.
"The local financial market has been determined by overseas factors, rather than
geopolitical risks," said Bae Min-keun, a researcher at LG Economic Research
Institute.
sam@yna.co.kr
(END)