Rocket launch has little impact on stock market

North Korea’s rocket launch had a limited impact on the South Korean bourse market with the Kospi edging up 0.55 percent to close at 1,975.44 yesterday, as the political risks were already reflected in the related markets.

The Kospi rose 3.42 points to 1968.15 at 10:18 a.m., minutes after the North fired off a long-range rocket from the nation’s northwestern region at 9:49 a.m.

Market analysts said the Kospi continued its rally despite threats posed by North Korea thanks to growing optimism for the Federal Reserve’s anticipated stimulus measure and fiscal cliff hopes.

Analysts at local brokerage firms said North’s rocket launch didn’t shake the South Korean financial market because it’s so called “learning effect” from past experiences involving the North.

“The Kospi recovered in a short period of time after the death of North Korean leader Kim Jong-il on Dec. 17, 2011, when tensions on the Korean Peninsula ran the highest,” said Kim Byeong-yeon, an analyst at Woori Investment and Securities.

Kim said the speed of the Kospi recovery in regard to North Korea’s threats has been increasing.

“North Korea’s rocket launch is deemed a diplomatic tactic intended to secure an upper hand in negotiations with major countries’ administration changes, so this doesn’t pose geographical risks,” said Kim Hyeong-ryeol, an analyst at Kyobo Securities.

“The foreign exchange market, which moves even more sensitively than stock markets, remains strong with the latest development. This indicates foreign investors, too, thought yesterday’s launch isn’t significant enough to impact the [South Korean] economy and corporate manufacturing operations.”

South Korean won ended at 1,075.00 won yesterday against the greenback, up 1.7 won from Tuesday’s close.

Major credit appraisers said they don’t expect the North’s rocket launch will exert a negative impact on sovereign ratings on South Korea.

“We believe developments following the launch will not raise geopolitical risks on the Korean Peninsula in a prolonged basis,” Standard & Poor’s said in a statement yesterday.

“We also view the negative economic impact on South Korea to be modest and temporary.”

Earlier in September, S&P moved its sovereign credit ratings on South Korea up to A+, its fifth-highest grade, and gave the country a “stable” outlook citing eased geopolitical risks from North Korea.

Shares of defense manufacturers, which surged at higher prices during morning trading hours after the rocket launch, slipped when the market closed yesterday.

Victek Corporation, which rose as high as 10 percent during morning trading hours, closed at 1,505 won, down 8.23 percent. Huneed Technologies closed at 4,210 won, down 5.21 percent.

Speco closed at 2,195 won, down 2.44 percent.

By Kim Mi-ju [mijukim@joongang.co.kr]