Kospi shrugs off Monday shelling and even rises

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Kospi shrugs off Monday shelling and even rises

North Korea’s shooting of artillery and rocket shells into Southern waters Monday failed to dent the stock market Monday or even yesterday.

In fact, the Kospi hit a high for the year.

Seoul’s main bourse rose 6.37 points yesterday owing to a buying spree by foreigners, despite a slight fall in the morning.

Foreigners have been net buying local shares for the past four days, helping the Kospi regain the 1,990 mark and reach 1,991.98, the highest level this year. They bought more than 200 billion won ($189 million) worth of shares.

On Monday, the market finished 4.61 points higher, even during the North’s firing of about 500 shells from artillery and rocket launchers between 12:15 p.m. and 3:30 p.m.

Vice Finance Minister Choo Kyung-ho presided over an emergency monitoring meeting yesterday morning, but the atmosphere of it was relaxed.

The government believes there won’t be much impact from the country’s geopolitical risks, including the North’s recent threat of a fourth nuclear test, on the Korean market.

“As investors have learned from repeated provocations by the North, the impact seems to be limited,” said the vice minister.

“Even if there was some impact, the market would have recovered quickly, as in recent years,” he said.

The country’s CDS premium, a measure of risk for bonds, remained unchanged Monday from the previous day.

Deputy Prime Minister and Finance Minister Hyun Oh-seok, who is visiting Brazil for an annual meeting of the Inter-American Development Bank, told reporters there that the Korean economy is robust enough to shrug off provocations by North Korea.

The continuing threats and actual live fire from the North are affecting the Korean economy less than in the past, analysts say. In November 2010, when the North shelled South Korea’s Yeonpyeong Island, the Kospi dropped less than 1 percent. In February, when it executed its third nuclear test, the market fell around 0.2 percent.

“Foreign investors are seemingly reacting more to the U.S. Fed’s movement than the North risks,” said an analyst at Woori Investment and Securities. “As there are signs of global investments from advanced markets returning to emerging markets, the buying spree of foreigners is likely to continue here.”

Fed Chairwoman Janet Yellen said in a speech Monday U.S. time that there is still room for the Federal Reserve to help the economy through its extraordinary monetary policy. Global investors have been paying keen attention to the new Fed chairwoman’s remarks, being highly worried of any signs of interest rate increases.

A government official, on the condition of anonymity, commented, “Yellen’s remarks seem more powerful than the North’s provocation.”

Some analysts say that the local securities market will be more sensitive to first-quarter earnings announcements from local businesses like Samsung Electronics than the seemingly perpetual North Korean threats.

“It may be a positive sign that the market is less being affected by such external factors and more by internal factors,” said an analyst at E-Trade Korea, a local securities firm.

BY song su-hyun [ssh@joongang.co.kr]

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