Rising tension on Korean Peninsula rattles Asian markets

World
Europe

The rising tension on the Korean Peninsula has cast a shadow on markets, driving investors away from risky assets into safe harbor.

The Democratic People's Republic of Korea (DPRK) has warned of preemptive missile strikes against the US military base of Guam in response to two US strategic bombers which were sent again Tuesday to South Korea, following the US President Donald Trump’s tough line that any threat from the DPRK would be met with “fire and fury.”

South Korea's unification ministry reacted on Wednesday saying the country was closely monitoring "possible provocation" from Pyongyang.

An aerial view of U.S. Naval Base Guam September 20, 2006. U.S. Navy/Handout/File Photo via REUTERS.

The political turbulence has spilled into the markets, blunt investors’ appetite for a high return on risky speculation.

The benchmark Shanghai index closed mid-day 0.25 percentage points lower and Hong Kong shares lost 225.23 points, or 0.81 percent, to close Wednesday's morning session at 27,629.68 points.

MSCI's broadest index of Asia-Pacific shares outside Japan fell 0.5 percent.

Tokyo stocks opened lower Wednesday and tumbled over the morning. Yen’s appreciation against US dollar has also weakened the vision for business output, exerting further downward pressure on stocks.

South Korean shares, which have been among the strongest performers in the world so far this year, fell 1 percent, while the won sank around 0.6 percent to 1,134.5 to the dollar. Both slid to more than one-month lows.

The gold price in Hong Kong went up 42 Hong Kong dollars to open at 11,820 dollars (about 1,510.70 US dollars) per tael on Wednesday, according to the Chinese Gold and Silver Exchange Society.

US stocks ended lower on Tuesday with the Dow losing 33.08 points and the S&P 500 being erased 5.99 points while the yield on the benchmark 10-year US Treasury note fell to 2.253 percent from its US close of 2.282 percent on Tuesday.

Spot gold added 0.4 percent to $1,265.22 an ounce, pulling away from the previous session's two-week lows.

North Korea "has no intentions of backing down. Tensions will continue to mount and could eventually develop into a 'black swan' event that the markets are not prudently considering," Steve Hanke, professor of Applied Economics at the Johns Hopkins University, told the Reuters Global Markets Forum on Wednesday.

Though Hanke said he did expect a sustained sell-off in riskier Asian assets, he added "safe assets, as a class, are probably underpriced at present."

Source(s): Reuters ,Xinhua News Agency