(Yonhap News)
Seoul stocks and the local currency rebounded modestly Tuesday on receding worries that the death of North Korean leader Kim Jong-il will bring drastic and immediate change to the economic climate.
The benchmark KOSPI advanced 0.91 percent to 1,793.06, reversing its sharpest loss in six weeks from Monday after North Korea announced that the communist leader had died on Dec. 17. The won gained 1.07 percent against the dollar to close at 1,162.2, recouping some of the 1.38 percent loss from the previous day.
“KOSPI managed to reclaim the sharp loss from Monday as local investors hunted for bargains. Foreign investors continued dumping Seoul shares but more investors are turning optimistic about the eurozone debt crisis, so the loss will be limited for the rest of the year,” Kwak Joong-bo, an analyst at Samsung Securities said.
KOSPI rose nearly 1 percent in the first 30 minutes of trade but the rise was stemmed as foreign investors remained net sellers, dumping a total of 330 billion won. Most blue chips recouped part of their loss from Monday, with telecommunication shares rising 4.17 percent and machinery shares gaining 2.66 percent on average. Chemical, steel and logistics shares rose about 1 percent each but bank and insurance stocks were losers.
Automakers rebounded sharply. The country’s biggest carmaker Hyundai Motor Corp. reclaimed 1.21 percent to close at 208,500 apiece and its affiliate Kia Motors Corp. advanced 3.69 percent to 67,400 won.
In efforts to calm investors, the government vowed to closely monitor the financial market and pledged to supply liquidity as needed in a meeting held before trading sessions began.
“At this moment, we expect that the sudden death of North Korean leader Kim Jong-il will have a limited impact on the financial markets at home and abroad,” Vice Finance Minister Shin Je-yoon said at a market-evaluation meeting with other policymakers.
“We will watch out for unusual pattern in the foreign exchange market and respond swiftly if needed,” Shin said.
Shin emphasized that Seoul had already avoided extreme volatility in the overnight foreign currency market, saying its non-deliverable forward trading and credit default swap premiums, financial instruments related to currency and sovereign risks, remained relatively stable.
Credit rating agencies said Kim’s death won’t affect the sovereign credit rating of South Korea in the near future, but Standard & Poor’s expressed concerns that the heightened geopolitical risks could continue to unfold.
“If a smooth political succession in North Korea shows signs of becoming unlikely, negative implications for the credit ratings would be likely,” S&P said.
By Cynthia J. Kim (cynthiak@heraldcorp.com)
