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Market rebounds after North Korea risk shock

South Korea’s main stock market rebounded Wednesday from a brief retreat after North Korea’s missile launch, but the foreign selling trend continued a second day.

The benchmark Korea Composite Stock Market Index rose 0.33 percent to close at 2,388.35 on Wednesday, after a 0.58 percent loss the previous day, the third-largest since May.

(Yonhap)
(Yonhap)
Foreign investors net sold 8.9 billion won ($7.7 million) in Korean stocks, a continued sell-off after 193.6 billion won was sold by offshore investors, which marked the third-largest volume since May.

Wednesday’s rise was largely driven by individual buying. The net purchases of individual investors stood at 54.9 billion won.

This came amid Asian markets’ recovery Wednesday. Tokyo’s Nikkei 225 climbed 0.25 percent, the Shanghai Composite rose 0.63 percent and Hong Kong’s Hang Seng went up 0.39 percent, as of 3 p.m.

The Kospi has ridden an all-time high momentum this year, especially since May after liberal Moon Jae-in was elected president. The all-time high close was 2,395.66 on June 29.

However, North Korea’s claimed successful launch of its first intercontinental ballistic missile on Tuesday shook South Korean markets.

The main bourse index dropped, foreign investors sold and the local currency fell on the same day, Tuesday, for the first time since Moon Jae-in took office on May 10.

Of the five previous missile tests since May, only two -- May 27, a Saturday, and May 29 -- led to losses, with the market on May 29 down 0.1 percent, while 24 billion won of foreign stocks was purchased.

Market watchers warned of re-emerging geopolitical risks, raising the possibility the North Korean nuclear issue may exert fresh pressure on the market’s record run.

“Regardless of the fundamentals of South Korea’s economy and businesses, North Korea’s missile launch will bring about a downward adjustment,” wrote Song Seung-yeon of Korea Investment & Securities in a Wednesday note. “Furthermore, if the Group of 20 summit sets the North Korea issue as its main agenda, the geopolitical risk will further shape out.”

The local currency also slightly recovered following a Tuesday retreat. The won strengthened 0.1 won to close at 1,150.5 won against the dollar from previous closing.

Treasury bond yields were almost unchanged, following Tuesday surge. The 3-year treasury yield was up 0.005 percentage points to 1.745 percent, while the 10-year yield rose 0.005 percentage points to close at 2.277 percent.

By Son Ji-hyoung (consnow@heraldcorp.com)
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