Asian stocks and currencies fell after North Korea launched at least seven missiles over the Sea of Japan, threatening the region's security.
The yen and the won reversed some losses as North Korea's newest long-range missile, which US military officials say can reach as far as Alaska, failed less than a minute after takeoff.
"It will only have a short-term impact," said Kim Seong-ki, who oversees US$1.6 billion as chief investment officer at SH Asset Management Co in Seoul.
"In the past, nuclear and missile-test tensions from North Korea didn't have a prolonged impact on the market. It could be a buying opportunity," he said.
The Morgan Stanley Capital International Asia-Pacific Index lost 1.1 percent to 126.46 at 5:46pm in Tokyo. Japan's Nikkei 225 Stock Average slid 0.7 percent. South Korea's Kospi index slid as much as 2.1 percent then rebounded to end 0.5 percent lower. The yen fell to a record 147.29 against the euro before trading at 146.90. Gold rose as much as 1.7 percent to US$630.75.
Shares and currencies slumped earlier on concern that the missile launches will undermine diplomatic efforts by the US, China, Japan, South Korea and Russia to persuade North Korea to give up its nuclear-weapons program.
"This surely weighs on sentiment, although I think it's just a bargaining gesture by North Korea and it's unlikely to develop into a regional conflict," said Kevin Yang, who manages US$100 million as Taipei-based vice president of International Investment Trust Co.
Toyota Motor Corp, Japan's largest company by market value, dropped 1.2 percent to ¥5,940. Mitsubishi UFJ Financial Group Inc and Honda Motor Co also fell.
Kookmin Bank, South Korea's largest lender, lost 1.7 percent while Taiwan Semiconductor Manufacturing Co (
"Market players initially dumped the yen and Japanese stocks and bought gold," said Masaki Fukui, an economist and currency analyst in Tokyo at Mizuho Corporate Bank Ltd. "They are now taking a wait-and-see attitude."
South Korean bonds rose, pushing yields to a three-week low. The three-year bond yield fell 3 basis points to 4.86 percent.
The yen traded at 115.15 per dollar. The South Korean won lost0.3 percent to 945.95 per dollar.
"This is a big deal, and is very bad for all of North Asia," said Sean Callow, a currency strategist at Westpac Banking Corp in Singapore. "We just don't know how far North Korea may go."
White House National Security Adviser Stephen Hadley said in Washington that the tests were "provocative behavior."
Gold rose after some investors used bullion as a haven. Gold for delivery next month rose as much as 2.7 percent in after-hours trading in New York. It was recently at US$627.
"North Korea will keep the gold market on the edge," Ron Cameron, a resources analyst at Ord Minnett Ltd, said from Sydney.
Gold rallied during previous turmoil or political unrest.
Spot gold surged 5.3 percent on Sept. 11, 2001, when terrorists attacked the US. The metal rose as much as 1.5 percent on March 8 after a report North Korea fired two short-range missiles near its border with China.
Silver for September delivery gained 3.8 percent to US$11.335 an ounce. Crude oil advanced as much as 48 cents to US$72.99 a barrel in London.
The MSCI index's drop yesterday halted a four-day, 6.2 percent rally that was the longest since the period ended April 21, as the largest companies in Japan and South Korea fell.
"This is going to be a blow to investor sentiment and will weigh on the market until the situation is resolved," said Park Jae-hoon, who helps oversee about US$800 million at Tong Yang Investment Trust Management Co in Seoul.
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