Bloomberg News

S.Korean Stocks, Won Slump on Growing North Korea Concern

April 09, 2012

A man walks behind a monitor displaying the Korea Composite Stock Price Index (KOSPI) at the Korea Stock Exchange in Seoul, South Korea. Photographer: SeongJoon Cho/Bloomberg

A man walks behind a monitor displaying the Korea Composite Stock Price Index (KOSPI) at the Korea Stock Exchange in Seoul, South Korea. Photographer: SeongJoon Cho/Bloomberg

South Korea’s stocks fell to a one- month low and the won weakened as speculation the North is preparing for a rocket launch and a nuclear weapons test heightened geopolitical risks on the peninsula.

South Korea’s Kospi Index (KOSPI) sank 1.6 percent to 1,997.08, its lowest close since March 7. The won declined 0.6 percent to 1,138.32 per dollar, according to data compiled by Bloomberg. It touched 1,138.90 earlier, the lowest level since March 29. Equities and the currency also dropped as U.S. jobs data missed estimates.

North Korea announced last month through state media that it intends to fire a long-range rocket to put a satellite in orbit between April 12 and April 16. The Pyongyang regime appears to be in the final stages of preparations for an underground nuclear test to follow the rocket launch, according to a report compiled by South Korean intelligence officials.

North Korea concerns “could be a short-term drag on the market as it reminds investors of the so-called Korea discount,” said Han Sang Soo, a fund manager at Seoul-based Samsung Asset Management Co., which oversees about $30 billion in assets. “That, combined with the U.S. job market data, may weigh on sentiment in the near term.”

South Korea sent 10 percent of its total outbound shipments to the U.S. last year, according to government data. Hiring by American employers rose 120,000 in March, data showed on April 6, trailing the most pessimistic economist forecast.

Rocket Launch

South Korea, Japan and China expressed concern over North Korea’s plan to launch a rocket as it raises tension in the region. North Korean space officials have moved all three stages of a long-range rocket into position at the launch site, the Associated Press reported yesterday.

Samsung Electronics Co. (005930), South Korea biggest exporter of consumer electronics, slipped 1.1 percent to 1.317 million won, while KB Financial Group Inc. (105560), owner of South Korea’s largest bank, dropped 2.6 percent to 41,600 won.

Victek Co. (065450), a South Korean maker of electronic warfare equipment, led gains in the country’s defense-related stocks today. Victek surged by the daily limit of 15 percent to 3,260 won, while Speco Co. (013810) jumped 15 percent to 3,895 won. Huneed Technologies (005870), a military communication equipment maker, rallied 15 percent to 4,600 won.

One-month implied volatility for the won, a measure of exchange-rate swings used to price options, gained 43 basis points to 8.6 percent. The yield on South Korea’s 3.25 percent bonds due December 2014 fell four basis points, or 0.04 percentage point, to 3.50 percent in Seoul, the lowest since March 13, Korea Exchange Inc. prices show.

“Reports that North Korea may launch a rocket near the end of this week is tilting market sentiment toward a weaker won,” said Ryoo Hyun Jung, a Seoul-based chief currency dealer at Citibank Korea Inc.

To contact the reporter on this story: Jiyeun Lee in Seoul at jlee1029@bloomberg.net Saeromi Shin in Seoul at sshin15@bloomberg.net

To contact the editor responsible for this story: Sandy Hendry at shendry@bloomberg.net Darren Boey at dboey@bloomberg.net


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