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Stocks

Seoul's financial market shrugs off North Korean missile launch

KOSPI edges down while local currency dips slightly

People in Seoul watch a broadcast on Nov. 29 of North Korea firing what appeared to be an intercontinental ballistic missile that landed close to Japan.   © Reuters

SEOUL - South Korea's financial market on Wednesday showed relatively little effects of North Korea's early morning missile launch, displaying resilience to repeated provocations by its troubling neighbor.

Seoul's benchmark KOSPI stock index slipped to 2,511.78 in morning trading, down 0.10% from Tuesday's close. Investors were relieved by news overnight that the Dow Jones industrial average rose 1.1% to 23,836.71, thanks to big gains by banks and financial companies.

The won-dollar exchange rate touched 1,083.20 in the morning, dipping 0.11% from yesterday's close. Until Tuesday, the won had gained 5.7% over the last two months on the back of strong exports and its unlimited currency swap deal with Canada earlier this month.

"We have found that impacts of North Korea's missile launch to markets are limited so far," said the finance ministry in a statement, after holding an emergency meeting in the morning. "The government and related agencies will monitor how the situation develops and its impact on markets."

Alarmed by the missile launch, the Bank of Korea also convened a closed-door emergency meeting in the morning. But the central bank did not disclose what they discussed in detail.

Credit ratings agencies say that North Korea is still a negative factor for South Korea's sovereign credits, although the country's economic fundamentals are strong. Last month in its annual credit analysis of South Korea, Moody's Investors Service said that elevated geopolitical risks, given tensions with North Korea, are the key credit constraint.

"Any military conflict would damage the economy, the functioning of the government and its finances, and potentially the country's payment system," said Moody's in a statement. "The severity of the credit impact would depend on the duration and intensity of any conflict." 

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