“South Korea’s stocks tumbled the most in more than four months and the won sank to a half-year low as the risk of conflict with North Korea curbed demand for the nation’s assets. The cost of protecting sovereign bonds against default climbed to the highest since September.
North Korea ratified a law this week authorizing plans for “counter-actions” against U.S. aggression including a nuclear strike, official media reported today. The communist nation in the past week said that a “state of war” exists with the South, announced plans to restart a mothballed nuclear plant and prevented South Korean workers from entering a jointly run industrial park at Gaeseong, on its side of the border.
“North Korea is heightening its threats day by day and that risk factor is having a negative impact on South Korean financial markets,” said Jeon Seung Ji, an analyst at Samsung Futures Inc. in Seoul. “Rising tension is prompting foreign investors to sell more Korean stocks, weakening the currency. In the meantime, exporters are likely to look for a point to sell dollars.”
The Kospi index fell 1.2 percent to 1,959.45 at the close in Seoul, its steepest loss since Nov. 15. The won dropped 0.5 percent to 1,123.71 per dollar, after touching 1,125.50 earlier, the weakest since Sept. 13. The currency slumped 5.3 percent in the past three months, Asia’s second-worst performer, as tensions with North Korea escalated.
