Date of publication: 13/02/2013
South Korea's economy is resistant to external shocks by North Korea's third nuclear test given the South strong market Foundation, said economists in Seoul.
They said that the effect of the North provocation on Tuesday, for us President Barack Obama State of the Union address, on the South Korean economy and financial markets would be "very limited", and that the North Korean nuclear capacity was more of a political issue than an economic issue.
"Shock of North Korea's nuclear test will not affect the South Korean economy on the mid or long term, just like the previous tests of the weapons by the North," said Kang Hyun-gu, Economist at Hyundai Securities.
The only company that can be affected by the North third test would be the joint Gaeseong business on the inter-Korean border, said Kang.
Risk factors associated with Gaeseong, however, have already been taken into account by South Korea and investors, and not significantly effect the South economy whose main export is the growth driver.
The Ministry of unification said that no signs of Gaeseong did not detect risks or danger.
Kim Chul-joong, an analyst at Korea Investment & Securities, also noted that North Korea's nuclear test was expected, and like the previous two nuclear tests would shock on the South Korean stocks and currency "very short-lived."
Morgan Stanley had noted that South Korea was no longer exposed to geopolitical risks from North Korea.
"There is no reason to give this a special meaning, given that geopolitical factors (about North Korea) have already reflected on South Korea," said Kang Hyun-cheol, strategist at Woori Investment & Securities.
He added that the North can affect test was not South Korea's credit ratings.
Seoul steps up market surveillance
South Korean financial authorities strengthens market supervision and emergency meetings to check their contingency plans after North Korea pushed ahead with its nuclear test despite warnings by international communities.
At an emergency meeting of senior officials, the financial supervisory service investors traffic on the stock and foreign exchange market closely monitored.
"While the North nuclear test was estimated to have little effect on the financial market, we have decided to closely monitor reaction among foreign investors by our overseas liaison offices," said a spokesman for the FSS.
He said that the regulator will minimize volatility in major financial indices by a number of urgent meetings in the next few weeks.
On the day, the financial services Commission and the Bank of Korea also each panel meetings held.
South Korean stocks fell only 5.11 points, or 0.26 percent, to close at 1, 945.79 with the North nuclear test have little effect on the market, analysts said. The Korean won gained 4.9 won against the dollar to reach 1, 090.8 won.
Although the KOSPI down sharply immediately after the news of the nuclear test, recovered somewhat, supported by "purchase orders" by foreign investors.
Foreigners reduced the extent of the decline in stock prices if they just bought stocks worth 135.3 billion won (US $ 125.2 million). Retail investors were also net buyers, while institutional investors just sold stocks worth 161.2 billion won.
Many research analysts agreed that the risks of the North nuclear test already in the stock and foreign exchange markets continuously as symptoms of months before considered.
North Korea's first test on October 9, 2006, with an explosive force of about 1 kiloton, fizzled out, and South Korea the KOSPI dropped only 2 percent on that day, with most sell-offs created by small investors. Foreign and institutional investors retain their buying positions.
The second test on May 25, 2009, which was seen as a "half success," exploding with about 2 kilotons, weighted the KOSPI down only 0.2 percent.
Analysts noted that the market rebounded immediately the day following the North tests, and fully recovered to surpass previous levels in less than five trading days.
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