Bloomberg News

South Korean Regulator Probes Spread of N. Korea Rumors

January 08, 2012

(Updates with investor comment in fourth paragraph.)

Jan. 6 (Bloomberg) -- South Korea’s financial regulator said it is investigating the spreading of rumors today concerning North Korea, and the nation’s stock exchange said it will probe whether there were any “unusual” trades made to profit from sudden market moves.

No evidence has come to support the rumors, which centered on speculation of an explosion in North Korea, Kim Soo Mi, a spokeswoman for the Financial Supervisory Service, said in Seoul. Officials at the defense ministry and President Lee Myung Bak’s office also said there was no evidence to validate the speculation.

The South Korean won declined as much as 0.9 percent today to 1163.15 per dollar, its weakest level since Dec. 20, while the benchmark stock index dropped as much as 2.1 percent. Stocks trimmed losses towards the close of trading, with Kospi index ending 1.1 percent lower at 1,843.14. The won finished at 1,162.75.

“As overall markets are still volatile, there seems to be people who are trying to make money by spreading such rumors and increasing volatility,” Kim Jae Dong, the Seoul-based head of equity at SEI Asset Korea Co., which manages about $5.7 billion in assets, said by telephone today.

Increased Monitoring

The financial regulator said on Dec. 28 it would boosting monitoring of market speculation related to North Korea after the Kospi index tumbled a day earlier on what exchange officials attributed to unconfirmed rumors about the health of the new leader of North Korea and plans by China to send troops to the communist nation.

The Kospi slid 3.4 percent on Dec. 19 when the death of North Korean leader Kim Jong Il was announced, dragging the gauge’s valuation to 1.1 times net assets, the cheapest level since Nov. 27. The index rallied 4 percent the next two trading days as the government pledged to take action to soothe markets and maintain growth in Asia’s fourth-largest economy.

North Korean state media have begun addressing Kim Jong Un by the “Supreme Commander” title held by his late father. Kim is thought to be under 30 and trying to secure power among senior North Korean political and military leaders more than twice his age.

“European debt concerns are continuing to have negative impacts on the market and rumors on North Korea prompted some investors to demand the dollar, whether the rumor is true or not.” said Lee Jin Ill, a Seoul-based senior currency dealer at Hana Bank in Seoul.

--With assistance from Sangwon Yoon and Jiyeun Lee in Seoul. Editors: Brett Miller, Darren Boey

To contact the reporter on this story: Saeromi Shin in Seoul at sshin15@bloomberg.net; Seonjin Cha in Seoul at scha2@bloomberg.net;

To contact the editors responsible for this story: Darren Boey at dboey@bloomberg.net Chitra Somayaji at csomayaji@bloomberg.net;


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