A monthly report published by the state-run Korea Development Institute said that uncertainties have accelerated in the Northeast Asian region and the risks have advanced to a more dangerous level as Pyongyang is almost reaching the final stage of testing a nuclear-tipped intercontinental ballistic missile.
It noted that players in the South Korean equity market may make a wrong decision if they assess financial risks based on the past experiences.
North Korea's previous provocations did not lead to broader spillovers, while the South Korean financial market remained relatively calm.
The KDI report said the North Korean risks may be the so-called black swan, a high-profile and hard-to-predict event that brings a catastrophic impact.
"It is hard to evaluate the exact level of danger sparked by North Korean provocations based on the past records," it said. "The market may underestimate the growing North Korean risks." (Yonhap)