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Seoul: Markets step back after latest North Korea missile launch

[SEOUL] South Korean stocks and the won pulled back slightly on Friday after North Korea launched a missile over northern Japan, not long after Pyongyang's latest and most powerful nuclear test.

But analysts said market reaction to the early Friday launch was relatively muted as another test had been expected and it did not pose a threat to US territory.

The won was at 1,135.3 to the US dollar as of 0015 GMT, down 0.2 per cent versus Thursday's close of 1,132.6.

The Korea Composite Stock Price Index (Kospi) was down 0.3 per cent at 2,370.79 points.

Market voices on:

"Investors believe the missile fell short of being any threat to the United States," said Paik Seokhyun, a foreign exchange analyst at Shinhan Bank.

Dutch bank ING said in its morning note that increasingly muted responses in riskier assets to North Korean sabre-rattling suggest a sense of fatigue is creeping in for investors.

Indeed, risk reversals in won options, used to hedge against volatility in the currency, were at 3.4 points, steady from the previous close.

The spread on South Korea's 5-year credit default swaps stood at 67.8 basis points, edging up from Thursday's 66.6 basis points.

South Korea's finance ministry said in a statement that increasingly frequent provocations by North Korea could continue to weigh on local financial markets and said it would minimise the negative impact from geopolitical risks.

In the stock market, decliners outnumbered advancers 521 to 258.

Market heavyweight Hyundai Motor was down 2.1 per cent while Samsung Electronics lost nearly one per cent.

But shares of Lotte Shopping soared as much as 9.6 per cent after the company picked Goldman Sachs to manage the sale of its supermarkets in China, after most of them were shut amid political tensions between the two countries.

Offshore investors sold a net 81 billion Korean won (S$96.2 million) worth of Kospi shares.

September futures on three-year treasury bonds was unchanged at 109.39.