Kaesong companies’ stocks take a hit

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Kaesong companies’ stocks take a hit

North Korea’s announcement that it would suspend operation of the joint inter-Korean industrial park in Kaesong and recall North Korean workers “indefinitely” has depressed the stock prices of South Korean companies with factories there.

About 120 South Korean companies employ 53,000 North Korean workers in the Kaesong Industrial Complex, located about 16 kilometers (9.94 miles) north of the Demilitarized Zone.

The share price of In The F, an apparel maker that produces the Joinus and Trugen brands, tumbled 7.49 percent to close at 778 won ($ 0.68). It was the biggest drop yesterday for a South Korean company operating in Kaesong, according to analysts at securities firms.

JY Solutec, a plastic mold company, closed at 755 won, down 5.51 percent from Monday.

Watchmaker Romanson retreated 3.62 percent to finish at 9,320 won, and underwear maker Good People fell 0.96 percent to 1,550 won. Taekwang Industrial slipped 0.52 percent.

“Share prices of companies with operations in Kaesong will probably fall further as North Korea is likely to continue its threatening actions until April 15, the birthday of North Korea founder Kim Il Sung,” said Han Chi-hwan, an analyst at KDB Securities.

Market observers acknowledged that risks posed by North Korea have negatively affected the South Korean bourse, with foreign investors dumping Korean stocks and bonds worth 3 trillion won last Wednesday through Friday. But they said there is a chance the Kospi will rebound after Monday.

“Tensions are likely to escalate until April 15,” said Jeon Ji-won, an analyst at Kiwoom Securities. “But given that a South Korea-U.S. summit is scheduled for early May, the meeting will provide a clue to dealing with North Korea and thus [South] Korean shares will rebound. This may be a chance for investors to buy low.”

Meanwhile, shares of defense companies surged, with manufacturer Speco up the daily limit of 15 percent to close at 6,070 won. Victec rose 10.32 percent and Firstec jumped 5.88 percent.

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

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