North Korean missile leaves local markets unperturbed

Korea’s financial markets remained unperturbed on Friday despite North Korea’s missile launch in the morning and the recent saber-rattling between the North and the United States.

The limited reaction indicates investors opted not to automatically respond to the North’s habitual threats, though the prices of some haven assets such as gold edged up. The main bourse Kospi closed higher at 2,386.07 on Friday, up 0.35 percent from the previous trading day. But in the early session after reports that North Korea fired a ballistic missile over Japan, the index dipped to as low as 2,365.37 after opening 0.39 percent lower.

Analysts see the risk associated with North Korea as already priced in the markets, at a time when outright conflict seems unlikely.

“We have been trained by North Korean threats,” said Kim Min-gyu, an analyst at KB Securities. “What determines the degree of fluctuations in the market is less about whether the event is positive or negative, and more about whether it is predictable.”

Still, foreign investors appeared to get cold feet, offloading 91.9 billion won ($81.2 million). Gold, instead, saw a bump as investors looked to move their money into the relative safety of haven assets. Comex gold prices were up $4.65, or about 0.36 percent, at $1,333.85 as of press time, while the price of gold compiled by Korea Exchange registered 48,370 won on Friday, up 0.54 percent from the previous day. Yields on 3-year Treasuries, which move inversely to the price, declined 0.003 percent to 1.739 percent. But yields of 5-year and 10-year Treasuries closed higher.

The Bank of Korea and the Ministry of Strategy and Finance called an emergency meeting to monitor the financial markets.

“We are closely monitoring the situation,” said Kim Dong-yeon, the Finance Minister. “But [North Korea’s action] is in line with scenarios that we have drawn. Still it is important to acknowledge that the tensions have ripple effects in the international community and last in a prolonged time.”

The Bank of Korea also held a separate meeting in the morning to discuss the potential impact of the latest threat. The Ministry of Trade, Industry and Energy said that it has formed task force teams to guard against any effect in exports, energy and trade.

BY PARK EUN-JEE [park.eunjee@joongang.co.kr]