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Seoul: Won, shares fall on wobbly China markets, North Korea

Wednesday, January 6, 2016 - 11:42
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South Korea's won and shares fell sharply on Wednesday morning, as the Chinese yuan extended losses and following reports North Korea may have conducted a nuclear test.

[SEOUL] South Korea's won and shares fell sharply on Wednesday morning, as the Chinese yuan extended losses and following reports North Korea may have conducted a nuclear test.

Stocks and the local currency extended losses as an earthquake that appears to have been man-made near a known nuclear-testing site in North Korea was detected by several monitoring agencies on Wednesday.

"The North Korean issue (possibility of having conducted a nuclear test) seemed to have limited effect in morning trade, but we need to keep an eye on it as the situation could worsen any minute," said Kang Hyun-gie, a stock analyst at Dongbu Securities.

The won was down 0.7 per cent at 1,195.8 per dollar as of 0305 GMT, set to mark its third straight session of losses.

South Korea's foreign exchange authorities were suspected by dealers to be engaging in market-smoothing activities to support the won against the dollar after the North Korean incident.

"Following the collapse of the Chinese yuan, the local currency could experience foreign exchange loss," said Jung Kyung-parl, a fixed-income analyst at Hana Futures.

On the stock market, the Korea Composite Stock Price Index (KOSPI) was down 0.7 per cent at 1,916.77 points.

Market sentiment was also dampened by a private survey showing activity in China's services sector expanded at its slowest rate in 17 months in December. The Caixin/Markit Purchasing Managers' Index (PMI) fell to 50.2 in December from November's 51.2.

Though declining issues outnumbered advancers by 2-to-1, South Korea's pharmaceutical index rose as much as 4.7 per cent on market expectations the sector would gain from the development of new medicines and contracts this year.

Foreign investors were set to be net sellers for a 23rd straight day, dumping a net 102.5 billion won (S$122.7 million) worth of KOSPI shares near mid-session, weighing on the index.

REUTERS