South Korea’s Won, Stocks Erase Declines That Followed Kim Jong Il’s Death

South Korea’s won and stocks rose the most in three weeks as concerns over possible political upheaval in North Korea eased and as U.S. housing data boosted the outlook for the Asian nation’s exporters.

South Korea’s benchmark Kospi (KOSPI) index rallied 3.1 percent to 1,848.41 as of the close in Seoul, the most since Dec. 1 and adding to yesterday’s 0.9 percent gain. The index has wiped out the 3.4 percent slump from Dec. 19 when the death of North Korea’s leader Kim Jong Il was reported. The won gained for a second day, jumping 1.3 percent to 1,147.60 per dollar, according to data compiled by Bloomberg. The currency was 1 percent higher than its closing price on Dec. 16.

South Korean Finance Minister Bahk Jae Wan said today financial markets have been stabilizing quickly after Kim’s death. Housing starts in the U.S. increased 9.3 percent to a 685,000 annual rate in November, exceeding the highest estimate of economists surveyed by Bloomberg News and the most since April 2010, government figures showed yesterday.

“Investors were relieved as issues surrounding North Korea didn’t deteriorate as much as expected, and this sentiment supported the won,” said Ryoo Hyun Jung, chief currency dealer at Citibank Inc. in Seoul. “U.S. economic data and exporters’ selling dollars to convert income also boosted the currency.”

Foreign Investors

Overseas investors bought a net 286.3 billion won ($249 million) of Kospi index stocks today, according to data from Korea Exchange Inc. They had sold a net 564.9 billion the previous two days, the data show.

Exporters and financial stocks led gains in the Kospi index. Samsung Electronics Co. (005930), South Korea’s biggest exporter of consumer electronics, rallied 4.4 percent, its steepest gain since Dec. 1. LG Electronics Inc. (066570), the world’s third-largest mobile-phone maker, gained 4.8 percent, while Hyundai Motor Co. (005380), South Korea’s largest automaker, gained 2.2 percent.

Financial stocks rallied following gains by peers in Europe yesterday. Hana Financial Group Inc. (086790), Woori Finance Holdings Co. (053000) and Industrial Bank of Korea (024110) rose more than 5 percent. Shinhan Financial Group Co. added 6.3 percent, leading gains among banks, after SK Securities Co. said the stock’s valuation is attractive.

The yield on South Korea’s 3.5 percent bonds due September 2016 fell two basis points, or 0.02 percentage point, to 3.51 percent, according to Korea Exchange Inc. prices. The rate reached 3.57 percent on Dec. 19, the highest since Nov. 2.

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

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

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