August 11, 2017 11:42 pm JST

Investors shun Asian stocks amid North Korea risk

Markets slump across Asia as Washington, Pyongyang exchange threats

TAKASHI NAKANO, Nikkei staff writer

North Korean leader Kim Jong Un, left, and U.S. President Donald Trump

SINGAPORE -- The escalating war of words between the U.S. and North Korea has rattled previously bullish investors, spurring a broad-based exodus from Asian stocks that had been riding high on a global flood of liquidity.

Asian markets sank across the board again Friday. South Korea's benchmark Kospi index slumped for a fourth straight day, falling 1.7%, while the Shanghai Composite Index dropped 1.6% after having hit a year-to-date high just this month.

U.S. President Donald Trump declared this week that any further threats from North Korea would be met "with fire and fury like the world has never seen." Pyongyang responded by announcing preparations for a plan to launch missiles toward waters near the American territory of Guam. Trump warned Friday that "military solutions are now fully in place."

With the Chinese government preparing for a leadership reshuffle at the twice-a-decade party congress in the fall as well, investors "have to be more attuned to geopolitical risks," a Hong Kong-based asset management company noted.

Hong Kong's Hang Seng Index slumped 2% as some 90% of its constituents retreated, with even previously popular financial and real estate stocks losing ground.

Indian and Southeast Asian markets were not immune despite otherwise strong performances this year. Singapore's Straits Times Index and Indonesia's Jakarta Composite Index each sagged more than 1%.

North Korean provocations historically have not caused long-term stock market declines on their own, but the situation is in flux, and investors must pay close attention, said James Cheo, an investment strategist at Bank of Singapore.

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