Korean Equities Extend Losses as Cyber Attack ProbedSaeromi Shin and Michael Patterson
South Korean stocks fell, extending the benchmark index’s biggest drop in two months yesterday, after a cyberattack shut down computer networks at some of the nation’s biggest banks and broadcasters.
SK Telecom Co., the largest Korean wireless operator, slumped 2.2 percent. Woori Finance Holdings Co., fell more than 2 percent for a second day. Samsung Electronics Co., South Korea’s biggest company by market value, retreated.
The Kospi slipped 0.4 percent to 1,950.82 at the close in Seoul, the lowest since Feb. 12, after earlier rising as much as 0.7 percent. The gauge retreated 1 percent yesterday with about half of the slump occurring in the last 20 minutes of trading. President Park Geun Hye has ordered an investigation into whether North Korea was behind the outages, according to a statement from her office. The cyberattack used malware code from China, according to an initial investigation that is focusing on possible links to North Korea.
“It shouldn’t be a big surprise even if the communist regime is found to be behind this,” Kim Jae Dong, head of equity investments in Seoul at SEI Asset Korea Co., which manages about $5.7 billion in assets, said by phone yesterday. “History shows that South Korean markets are resilient to provocations by the North, and I think this time won’t be different.”
The Kospi has fallen 2.3 percent this year, compared with a 2.8 percent retreat in the MSCI Emerging Markets Index. Trading volumes in Kospi shares were about 29 percent less than the 30-day average, according to data compiled by Bloomberg. The Kospi 200 Volatility Index, a measure of the cost to protect against equity losses, rose 0.6 percent to the highest level in four months.
The valuation on the Kospi is 8.9 times projected 12-month earnings after the plunge, the cheapest level since Feb. 7, data compiled by Bloomberg show.
Computer systems of at least three banks and three television stations were shut down. Companies including Shinhan Bank, Nonghyup Bank, YTN, Munhwa Broadcasting Corp. and Korean Broadcasting System were affected, according to the Korea Communications Commission.
Around 32,000 servers were damaged in yesterday’s attack, the Korea Communications Commission said today in a statement. China’s Foreign Ministry didn’t immediately respond to faxed questions seeking comment.
SK Telecom fell 2.2 percent to 180,000 won. Samsung, Asia’s biggest maker of chips and flat screens, slipped 0.2 percent to 1,457,000 won. Woori Finance slumped 2.1 percent to 11,800 won. Shinhan Financial Group, which owns Shinhan Bank, dropped 1.6 percent in a ninth day of losses, the longest losing streak since June 2008.
North Korea this month threatened to scrap the 1953 armistice that ended the Korean War and cancel a cross-border phone hotline after the UN Security Council unanimously approved tougher sanctions over a forbidden nuclear test. The two Koreas remain technically at war as the 1950 to 1953 conflict ended in a truce, not a peace treaty.
U.S. stocks rose yesterday, snapping a three-day decline in the Standard & Poor’s 500 Index, as the Federal Reserve said it will keep up its bond buying to stimulate the economy and euro-area leaders weighed options for Cyprus.
“Even if North Korea is found to be responsible for the attacks, the impact won’t be big,” Colin Kim, head of portfolio management at the multi-strategy division of Mirae Asset Global Investments Co., which oversees about $50 billion, said by phone yesterday. “What happens in European and U.S. markets will have a bigger sway over market direction.”