Financial markets largely unscathed by N. Korean nuke test

By Kim Soo-yeon

SEOUL, May 25 (Yonhap) -- South Korea's financial markets were little affected Monday by North Korea's announcement of another nuclear experiment as most investors shrugged off its fallout, analysts said.

After a roller-coaster session, the benchmark Korea Composite Stock Price Index
(KOSPI) fell 2.85 points, or 0.2 percent, to 1,400.90, with the local currency
ending at 1,249 won to the U.S. dollar, down 1.6 won from Friday's close.
"Investor sentiment was initially dented by the news, but the KOSPI cut earlier
losses as investors were used to North Korean risks," said Lee Sun-yup, a market
analyst at Goodmorning Shinhan Securities Co.
North Korea claimed earlier in the day that it has successfully conducted a
nuclear test, bolstering its nuclear deterrent for self-defense. North Korea
conducted its first nuke test in October 2006.
The country's key stock index plunged as much as 6.31 percent in the morning
session and the local currency fell to as low as 1,269.4 won at one point, but
the stock and currency recouped earlier losses toward the market close.
"It is true that market players have been muted on nuclear threats from North
Korea. As long as the situation does not get too extreme, the North Korean issue
is likely to have a limited impact on the markets," said Jeon Seung-ji, a
currency analyst at Samsung Futures Inc.
The market's reactions come amid growing tension on the Korean Peninsula after
North Korea launched a defiant rocket on April 5. The launch prompted the U.N.
Security Council to issue a condemnation saying the launch violated a Security
Council resolution banning the North from ballistic activity.
The government and the financial watchdog scrambled to quell possible market
jitters sparked by the nuke test.
"The watchdog plans to make utmost efforts to ease possible jitters stemming from
a second nuclear test conducted by North Korea," Chin Dong-soo, chairman of the
Financial Services Commission, told reporters at an emergency financial meeting.
"Stability in the local financial markets is key to bringing the Korean economy
to a recovery path."
Also Monday, analysts said the market largely shook off the death of former South
Korean President Roh Moo-hyun.
Roh, who served as South Korea's president from 2003 to 2008, committed suicide
on Saturday by jumping off a mountainside in his hometown amid an ongoing
investigation into a bribery scandal.
Analysts said although investors showed a muted reaction to the nuclear test,
volatility in the markets might increase due to uncertainty.
"The Seoul stock market is likely to see some volatility down the road in tandem
with how strongly the international community reacts to the test," said Rhoo
Yong-seok, an analyst at Hyundai Securities Co.
Jeon at Samsung Futures said that the local foreign exchange market will undergo
some fluctuation this week as market players will likely focus on the
repercussion from the nuclear test and a possible bankruptcy filing by U.S.
carmaker General Motors Corp. She predicted that the Korean won will trade in the
1,230-1,280-won range this week.