Seoul's financial markets shrug off N. Korea's rocket launch

SEOUL, April 6 (Yonhap) -- South Korea's stock and currency markets shook off North Korea's defiant rocket launch and gathered ground on Monday as investors had long factored it in, analysts said.

Defying repeated warnings from the United States, Japan and other countries,
North Korea launched a long-range rocket on Sunday, which South Korea and
Washington claim splashed into the Pacific Ocean.
The benchmark Korea Composite Stock Price Index (KOSPI) rose 1.1 percent to
1,297.85. The local currency closed at 1,309.5 won to the dollar, up 31 won from
Friday's close and the highest level since Jan. 7.
Analysts said the rocket launch had a limited impact on the Seoul financial
markets as investors are accustomed to geopolitical risks coming from the North's
military threats.
"The North's rocket launch was widely anticipated, having little impact on
investor sentiment," said Lee Sun-yup, an analyst at Goodmorning Shinhan
Securities Co. "The news rather helped dispel uncertainty surrounding
geopolitical risks."
The KOSPI breached the 1,300-point level for the first time in about six months
in morning trading, lifted by a buying spree of local stocks by foreign
investors. Offshore investors bought a net 249.2 billion won (US$190.3 million)
worth of local stocks on the main bourse.
The rallies in the Seoul bourse also gave a boost to the local currency, which
has dipped 3.82 percent per the greenback so far this year.
"The won's strength comes as risk appetite revived amid some cautious signs of
economic recovery," said Jeon Seung-ji, a currency analyst at Samsung Futures
Inc. "The news related to North Korea has exerted a limited effect on the local
financial markets, but there is a need to be watchful about how the international
community will respond to the issue."
The previous responses of the stock market to military threats by the North give
some support to the analysts' prediction.
The KOSPI inched lower on July 5, 2006 when the communist country test-fired six
medium and long-range missiles that landed off the west coast of Japan. Although
the key stock index tumbled 2.4 percent on the day of North Korea's nuclear
weapon test in October 2006, it recouped its losses after about 15 sessions.
Experts say the speed at which the global economy enters a recovery phase will be
a key to bringing a full-blown stabilization to the local financial markets.
"The direction of the Seoul stock market will be swayed by corporate earning
results and the depth of the economic downturn," Lee at Goodmorning Shinhan
Securities said.
Jeon added that it is possible that the Korean currency may rise to the 1,250 won
level down the road, but it could face some volatility until uncertainty about
the U.S. banking sector is fully dispelled.