Romanson Co. led declines among shares of companies that do business in North Korea after South Korea decided to withdraw all its citizens remaining at an industrial park jointly run with the communist regime.
Romanson, a wrist-watch maker that operates a plant at the Gaeseong industrial complex, declined 1.3 percent to 11,700 won as of 10:25 a.m. on the Korea Exchange, poised for its lowest close since April 22. Shinwon Corp., an apparel maker, fell 2 percent, and underwear maker Good People Co. sank 0.6 percent.
South Korea’s Unification Minister Ryoo Kihl Jae told reporters on April 26 that President Park Geun Hye had made the “inevitable” decision to withdraw citizens from Gaeseong, which has been shut down since North Korea recalled its workers three weeks ago. The North ignored a deadline to accept an offer for talks on reopening the facility.
The complex, about 10 kilometers (6 miles) north of the demilitarized zone between the two countries, employs more than 53,000 North Koreans at 123 South Korean companies. It’s the last point of inter-Korean exchange and an important cash source for the impoverished nation.
“Investors are worried that the shutdown of the facility may affect earnings of Gaeseong-related companies,” Kim Gi Bo, a Seoul-based fund manager at Friend Investment Management, said today. “It will take some time to secure production capacity that’s lost from the closure.”
The Korean peninsula has been on edge since February, when Kim Jong Un’s regime detonated an atomic bomb in defiance of United Nations sanctions and then threatened preemptive nuclear strikes against its enemies.
North Korea generates $100 million in annual profits at Gaeseong, while South Korea makes quadruple that amount, according to Yang Moo Jin, a professor at the University of North Korean Studies in Seoul.