As tensions rise, South tightens market security

Home > Business > Economy

print dictionary print

As tensions rise, South tightens market security

South Korea’s financial authorities have said they will beef up monitoring of the local financial markets for possible provocations from North Korea. The move comes in the wake of Pyongyang’s pronouncement that it will nullify its non-aggression pact with the South in protest of new UN Security Council sanctions against the Kim Jong-un regime.

“The UN Security Council’s latest sanctions against North Korea are tougher than previous ones and this may prompt considerable backlash from the country,” Bank of Korea Senior Deputy Governor Park Won-shik said in a monetary and financial countermeasure meeting yesterday. “As [South Korean] financial markets, including the stock markets and the foreign exchange, may experience some impact, we will closely monitor them. And if necessary, we will closely work with the government on stabilizing the markets.”

Following the North’s third nuclear test on Feb. 12, the UN Security Council unanimously adopted a resolution on Thursday morning (Eastern Standard Time) that imposes tougher-than-ever restrictions on Pyongyang similar to those being used against Iran. The resolution calls for a blocking of financial transactions or cash transfers that could contribute to the North’s nuclear programs. It has expanded the list of blacklisted North Korean individuals and enterprises involved in the weapons trade and toughened bans on luxury exports to Pyongyang and inspections of cargo headed to and from the country by air or sea.

Lashing out at the resolution, North Korea announced it will nullify the non-aggression pact between two Koreas and sever its emergency hotline with the Seoul, heightening already high tensions on the Korean Peninsula.

Financial Services Commission vice chairman Choo Kyung-ho said the impact of the North Korean threat will be limited on local financial markets, but the financial regulator will step up information sharing with related organizations including the Ministry of Strategy and Finance, Bank of Korea and Financial Supervisory Service in case of contingencies.

“If North Korea makes additional provocations it would increase the chance of more, tougher sanctions against the regime initiated by the United States and Japan,” Choo said. “We cannot rule out the possibility that this may increase market volatility and geographical risks.”

The local bourse market remained firm, even moving up despite the hostile message from Pyongyang. The benchmark Kospi tumbled as low as 1,994.25 during trading hours as the threats somewhat dented investor sentiment. But the index recovered as institutional investors started buying. It closed at 2006.01 yesterday, up 0.08 percent compared to Thursday. Analysts said investors have developed an immunity to the risks posed by North Korea after a long series of provocations, attacks and such major events as the death of Kim Jong-il in December 2011.

The North latest nuclear test had a minimal impact on the South Korean stock market. The Kospi ended at 1,945.79 at 3 p.m., down 5.11 points from the previous trading day.

Even if the Kospi tumbles because of something Pyongyang does, that would provide an opportunity for investors to buy on dips, they said.

“Geographical risks posed by North Korea will have a meager effect on local financial markets, just as we’ve witnessed from the some 10 previous military provocations from the North since 1996,” said Kim Jae-hong, an analyst at Shinyoung Securities.

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

More in Economy

Number of part-time workers hits record high

Closing for good

Those who didn't buy are singing the real estate blues

Gov't to provide ₩30 trillion in trade financing for green, digital exports

Covid-19 pushes employment numbers down by 218,000 in 2020

Log in to Twitter or Facebook account to connect
with the Korea JoongAng Daily
help-image Social comment?
lock icon

To write comments, please log in to one of the accounts.

Standards Board Policy (0/250자)

What’s Popular Now