Kospi is briefly shaken but rapidly recovers
But the Seoul market steadily recovered - showing once again that even the most earth-shaking provocations by North Korea have limited impact on the market.
The benchmark Kospi started the day by adding 2.91 points from the previous day. But after news broke at around 10 a.m. of a seismic event that could be an atomic test, it fell as much as 1 percent to 1,912.73.
But as the day progressed - and North Korea bragged that it had tested a hydrogen bomb, which would be significantly more powerful than any of its previous tests - the market finished by falling only 0.26 percent, or 5.10 points, to close at 1,925.43.
Contributing to the fall were foreign investors, who have been on a selling spree for 23 consecutive trading days. On Wednesday, they sold off 109.5 billion won ($91.3 million) worth of stocks.
In October 2006, when North Korea performed its first nuclear weapon test, South Korea was truly rattled, and the Kospi tumbled 2.4 percent.
But in the following three nuclear tests, including the one on Wednesday, the Kospi’s drop was limited to less than 0.3 percent.
“North Korea’s test will have only a limited impact on the local market,” Financial Services Commission (FSC) Chairman Yim Jong-yong said on Wednesday. “The North’s previous nuclear tests did not affect the market much, and it will be similar this time as well.”
Yet, government officials in charge of the financial sector and business held numerous meetings as a precaution, including an emergency macroeconomic session held by the Ministry of Strategy and Finance. FSC Vice Chairman Jeong Chan-woo presided over a meeting with the nation’s key finance officials, including Jeong Eun-bo, the deputy minister of strategy and finance.
Although the finance minister and other government officials agreed that the impact of the nuclear test has been limited, they warned that additional tests could have a deeper impact, especially when the market is already jittery about the Chinese economy and rising tensions in the Middle East. The government said it will form a task force to monitor the current situation both at home and abroad.
“It appears that the local market will remain weak until the end of the month,” Lee Kyung-min, a researcher at Daishin Securities, said. “The trend might change if Samsung’s preliminary fourth-quarter report, which is expected to be released on Friday, shows outstanding data.”
North Korea’s test had a mixed impact on its neighboring countries. Japan’s Nikkei 225 fell 0.99 percent to 18,191.32, and Hong Kong’s Hang Seng index lost nearly 0.60 percent. In contrast, China’s Shanghai composite index and CSI 300 index both added more than 1 percent on Wednesday.
Korea’s won weakened on Wednesday after the People’s Bank of China cut its reference rate by 0.22 percent to 6.5314 a dollar, the lowest level since 2011. The won weakened 0.83 percent to close at 1,197.90 a dollar in Seoul.
“Korea’s won might depreciate faster than expected, and it can be traded around at 1,209 a dollar by this week,” Chung Kyung-pal, a strategist at Hana Futures, said.
As more investors sought safer assets, the Japanese yen and price of gold rose. The yen was up 0.39 percent to 118.66 a dollar.
BY KIM YOUNG-NAM [kim.youngnam@joongang.co.kr]
with the Korea JoongAng Daily
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