Asian stocks dropped yesterday after North Korea said it had carried out a nuclear weapons test. Samsung Electronics Co and China Mobile Ltd led the decliners.
"North Korea is making its neighbors very nervous," said Yang Jeung Won, who oversees about US$2.1 billion as chief investment officer at Samsung Investment Trust Management Co. in Seoul. "Investors could take the news as a chance to exit."
Airlines including Korean Air Lines Co slumped on concern political instability will deter travel in the region and as oil prices rose in New York. The South Korean government raised its military alert level, as North Korea's actions were condemned internationally.
The nuclear test prompted a sell-off in regional stock markets. Hong Kong's Hang Seng Index lost 1.1 percent, while Singapore's Straits Times Index dropped 1.4 percent, set for the biggest decline in almost three months.
Markets in Japan and Taiwan were closed yesterday for holidays.
China's stocks rose in the first day of trading after a weeklong holiday.
Markets fell elsewhere in the region, except in New Zealand, Pakistan and Sri Lanka.
Samsung Electronics, South Korea's largest exporter, dropped 0.9 percent to 642,000 won (US$676). China Mobile, the world's largest cellphone operator by market value, declined 2.4 percent to HK$56.15 (US$7.20).
currency lows
Both the Japanese yen and the South Korean won were hit hard.
The yen fell to an eight-month low of 119.30 per US dollar, from 118.83 before North Korea's government-controlled news agency reported the test.
The won had its biggest drop since Dec. 8, 2004, slumping 1.6 percent to 963.90 at the 3pm close of local trading, according to Seoul Money Brokerage Services Ltd.
South Korea's central bank said it would take measures if needed to keep the financial markets stable.
The Bank of Korea said in a statement the measures would include additional supply of liquidity into the financial system but did not elaborate on other possible measures.
"The nuclear test, conducted in a scientific method and under specific calculations, did not cause any danger," North Korea's Central News Agency said. It was the first time the nation has announced a nuclear test.
China's government called the test a "brazen" disregard of international opinion in a statement posted on the Foreign Ministry's Web site, while Japan called for "decisive action."
"Everything, North Asia in particular, will feel the brunt," said Hans Goetti, a managing director in Singapore at Citigroup Private Bank. "It's bad for sentiment."
Hynix Semiconductor Inc, Asia's second-largest maker of computer memory chips, dropped 4.3 percent to 34,950 won.
Hyundai Engineering & Construction Co, South Korea's No. 2 contractor by market value, slumped 6.2 percent to 46,600 won.
Elsewhere in the region, National Australia Bank Ltd., the nation's biggest lender by assets, slid 0.8 percent to A$37.25.
Chartered Semiconductor Manu-facturing Ltd., which makes chips used in Microsoft Corp.'s Xbox 360 game machine, declined 1.7 percent to S$1.16. Esprit Holdings Ltd, which sells its own brand of apparel, lost 1.3 percent to HK$70.80 in Hong Kong.
Airlines Plunge
Korean Air, the nation's biggest airline, slumped 5.6 percent to 32,100 won. Asiana Airlines Ltd, the second largest, lost 4 percent to 6,530 won.
Oil for November delivery climbed as much as 1.2 percent to US$60.50 a barrel in after-hours electronic trading on the New York Mercantile Exchange after Saudi Arabia and five other OPEC mem-bers agreed to cut output by 3.4 percent to stem a two-month slide in prices.
"If the situation leads to a war, there will be no demand for travel and that sentiment is dragging airline shares down [yesterday]," said Seo Jin Hee, an analyst at SK Securities Co, Ltd. in Seoul.
"Expectations that oil prices may rebound after hitting the bottom recently is also bad news," the analyst said.
Singapore Airlines Ltd, the world's second-largest carrier by market value, slid 0.7 percent to S$15.10. Cathay Pacific Airways Ltd, Asia's second-most profitable carrier, fell 2.8 percent to HK$16.28. Air China Ltd., the nation's biggest international carrier, lost 3.6 percent to HK$3.45.
Meanwhile, stocks in China advanced on speculation its markets would see an inflow of funds. The Shanghai Composite Index, which tracks yuan-denominated A shares and foreign-currency B shares, rose 1.8 percent, set for its highest close since September 2001.
North Korea's nuclear test "will make investors pull money out of Japan and South Korea," said Paul Pong, managing director at Pegasus Fund Managers Ltd. in Hong Kong. "That capital will flow into China and Hong Kong."
The repercussions of a nuclear test by North Korea could be severe, although a lowering of the Republic of Korea's ratings would not be certain, Standard & Poor's (S&P) Ratings Services said yesterday.
"Although the test was not confirmed by seismic observation or other measures, in the view of S&P, a successful nuclear test would not by itself result in a downward revision of the sovereign ratings on Korea [A/Stable/A-1], or negatively affect the stable outlook attached to the country's ratings," Standard & Poor's credit analyst Takahira Ogawa of the Sovereign Ratings group said.
"This is because the prospect of a nuclear test leading to economic sanctions severe enough to hasten a collapse of the North Korean regime, or worse, spark a full-scale military conflict, are still remote," Ogawa said.
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The Central Weather Administration (CWA) is set to issue sea and land warnings for Tropical Storm Krathon as projections showed that the tropical storm could strengthen into a typhoon as it approaches Taiwan proper, the CWA said yesterday. The sea warning is scheduled to take effect this morning and the land warning this evening, it said. The storm formed yesterday morning and in the evening reached a point 620 nautical miles (1,148km) southeast of Oluanpi (鵝鑾鼻), Taiwan proper’s southernmost point, moving west-southwest at 4 kph as it strengthened, the CWA said. Its radius measured between 220km and 250km, it added. Krathon is projected
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