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Hyundai Motor shifts to net loss of 203.3 bln won in Q4

N.K. leader's death to heighten uncertainty on S. Korean stock market

All Headlines 15:11 December 19, 2011

SEOUL, Dec. 19 (Yonhap) -- The death of North Korean leader Kim Jong-il will boost uncertainty in the South Korean stock market with its aftershock likely to last for some time, analysts said Monday.

Seoul's key stock index, the KOSPI, sank 3.43 percent, or 63.03 points, to close at 1,776.93. It dropped as low as 1,750 points right after news of Kim's death, but recovered to some degrees on expectations that the impact on the local bourse could be short-lived.

Analysts said the North Korean leader's death, coupled with accompanying heightened geo-political risks, will boost uncertainty in the market, already dented by an ongoing debt crisis and slowdown of the global economy.

"Kim's death will be different from the past, and it is unlikely to have a short-term impact on the market," said Oh Seung-hun, an analyst at Daishin Securities. "Investors should take to the sidelines and wait and see how things will develop."

In the past, the local stock market has been buffeted by major events involving North Korea, but recovered soon after as investor sentiment improved. On July 8, 1994, when North Korea founder Kim Il-sung was reported dead, the KOSPI gained 0.34 percent, although the index lost 0.8 percent on the following day.

On June 15, 1999, the KOSPI dropped nearly 4 percent to 803.72 after the two Koreas engaged in a naval skirmish in the West Sea, but then rallied to 1,052.59 in just two months.

When North Korea conducted its first nuclear test on Oct. 9, 2006, the KOSPI fell 2.41 percent, but again later regained its territory.

Analysts said this time it is unclear whether the stock market will take a similar path as the death of the iron-fisted leader will cause instability in the communist state and uncertainty in the East Asian region.

Kim Se-choong, an analyst at Shinyoung Securities, said things could become chaotic. "Any new and unexpected developments would put the market into a panic," he said.

Some analysts said, however, that the news provided a chance to buy undervalued shares.

"Investors are wary of heightened geopolitical risks, but may attempt to buy on dips," Samsung Securities said in a note to investors.


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