Seoul: Won, shares tumble to over 1-month lows as US-North Korea tensions heat up

[SEOUL] The South Korean won and shares extended losses to more than one-month lows on Wednesday after North Korea said it is considering plans for a missile strike on the US Pacific territory of Guam.

The statement came just hours after President Donald Trump told the North that any threat to the United States would be met with "fire and fury", rattling global financial markets.

The Korea Composite Stock Price Index (Kospi) was down 0.7 per cent at 2,377.17 points by 0138 GMT. It fell to as low as 2,371.28 earlier, its lowest intraday level since June 23.

Despite more frequent sabre-rattling by the North, the index has been among the strongest performers in the world so far this year, gaining more than 17 per cent.

The won sank around 0.8 per cent to 1,134.4 to the US dollar, its weakest since July 14.

"The won has recently been reacting quite sensitively to Trump's comments and investors' anxieties worsened today as the North came up with an aggressive response," said Jung Sung-yoon, a foreign exchange analyst at Hyundai Futures.

Foreign investors turned sellers after buying on Monday and Tuesday, with large tech shares Samsung Electronics and SK Hynix falling 1.8 per cent and 2.4 per cent, respectively.

The sub-index for techs fell nearly 2 per cent.

"That's what usually happens when there is a great concern over geopolitical issues with North Korea," said Kim Ye-eun, a stock analyst at Cape Investment & Securities.

Offshore investors offloaded a net 52 billion won (S$62.74 million) worth of Kospi shares near mid-session.

But shares of defence-related companies rose, with LIG Nex1 Co Ltd up nearly 5 per cent and Firstec up 3 per cent.

Washington has warned it is ready to use force if need be to stop North Korea's ballistic missile and nuclear programmes but that it prefers global diplomatic action, including sanctions.

The spread on South Korea's 5-year credit default swaps stood at 56.4 basis points and risk reversals in won options at 1.2 points, both well below their last highs seen in April.

September futures on three-year treasury bonds shed 0.15 point to 109.98.

REUTERS