Markets ignore missile launch

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Markets ignore missile launch

Local stock markets Monday were barely affected by North Korea’s missile test on Sunday.

The benchmark Kospi, in fact, closed at 2,078.65, up 3.57, or 0.17, percent compared to the previous trading day.

“Even though the geopolitical risks grew due to Pyongyang’s missile test on Sunday, the Kospi managed to go up following a rise in the U.S. Dow Jones index, which hit an all-time high and global crude oil prices,” said the Korea Exchange in a press release on Monday. “Other signs such as the improvement in Korea’s preliminary export data for this month also helped attract both foreign and institutional investors.”

The secondary Kosdaq also gained 1.36 points, or 0.22 percent, to close at 611.94.

This was a big change when compared to North Korea’s most recent nuclear test last year.

On Sept. 12, 2016, the Kospi plummeted 46.39 points, or 2.28 percent, from the previous trading day to close at 1,991.48. It was the first trading day after Pyongyang’s nuclear test on Sept. 9.

The government’s key economic players held a meeting Monday to monitor the impact from the missile test. However, the government pointed out that the negative impacts from Pyongyang’s past provocations were limited and fleeting.

“North Korea fired a ballistic missile yesterday and North Korea’s past nuclear and missile tests had only limited and temporary impacts on the local financial markets,” said Finance Minister Yoo Il-ho. “However, there are chances that the volatility in the local financial market and economy might expand as uncertainties continue to rise in the world following the new administration in the United States and political instability in Europe. The government will monitor closely to reduce the negative impacts coming from such uncertainties.”

Korea Exchange data showed that the benchmark Kospi dropped 72 points during two trading days following the North’s fifth nuclear test on Sept. 9 last year. The index dropped from 2,063 on Sept. 8 to 1,991 on Sept. 12. But the market rebounded within six trading days.

“This is the first type of provocation by North Korea after Donald Trump became president in the United Sates and there is a chance that the scenario might change from the past depending on how other countries react,” said Joo Hwan-wook, a director at the Finance Ministry. “We will also cooperate closely with foreign investors, credit rating companies and the foreign press so that the missile test has a limited impact on the country’s credit rating and foreign investors’ sentiment.”

The Korea Center for International Finance, a financial market analyst, released a press release saying the Korean government and investors should worry about possible reactions by the Trump administration and the test of an intercontinental ballistic missile or ICBM in the near future.

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