South Korean Markets Show Resilience After North Fires Missile

  • Kospi, won pare earlier losses, similar to previous launches
  • Only an actual attack would spark a big reaction: MUFJ Kokusai

Harvard's Park Says Expect More N. Korea Missile Tests

South Korean stocks and the won pared losses as investors digested the impact of North Korea’s second missile launch over Japan in less than three weeks.

The Kospi index gained 0.4 percent at the close of trading in Seoul, reversing an earlier drop of as much as 0.5 percent. The won also recouped losses and was 0.1 percent stronger against the dollar.

The launch followed threats from Kim Jong Un’s regime that it would “sink” Japan with a nuclear weapon. Even with the escalating rhetoric and action from Pyongyang, the Kospi equity benchmark has continued to trade near record levels as analysts expect corporate profits to almost double this year. U.S. markets seemed to shrug off Thursday’s provocation from North Korea, which was responding to further United Nations sanctions.

“There won’t be much of an impact on markets,” said Cho Kyung-Taek, a fund manager at Korea Investment Management. “In previous cases, markets rebounded in the afternoon after dropping a bit in the morning.”

North Korea has conducted more than a dozen missile tests this year, including several inter-continental ballistic missiles, leading to a war of words in August between U.S. President Donald Trump and Kim’s regime that has rattled global markets.

Investors and analysts outside of Korea also saw limited impact on markets for now. The yen, considered a haven asset, declined 0.4 percent against the dollar.

“If they were just testing a missile, it’s sort of business as usual,” said Chris Weston, chief market strategist at IG Group in Melbourne. “If markets saw some sort of progression, either it went over a country again, or landed fairly close to a country, then they would show a little bit more angst.”

The cost of insuring five-year South Korean sovereign bonds from nonpayment rose further in the afternoon to 69.5 basis points from 68.5 this morning, according to prices from Nomura Holdings Inc.

Trump was briefed on Friday’s missile launch, White House Press Secretary Sarah Sanders said in a statement. He will visit South Korea, Japan and China in November, on his first trip to Asia since taking office, Yonhap News reported, citing that Trump told reporters aboard Air Force One.

The impact from Friday’s launch will probably be muted as Pyongyang was expected to react to the UN resolution and this was within expectations, said Hideo Shimomura, the chief fund manager in Tokyo at Mitsubishi UFJ Kokusai Asset Management Co. “Anything like an actual attack would spark a really big reaction in the market, but that’s not the main scenario at this point,” he said.

— With assistance by Matthew Burgess, Yumi Teso, Adrian Leung, Hooyeon Kim, and Lianting Tu

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