Reuters Insider - Inside the News: Korean Assets Fall on Threat of Attack
13/06/2016 11:01
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Source: Thomson Reuters
Description: South Korean stocks and the won fall as tensions
mount ahead of a live-fire exercise by the South's
military forces. North Korean artillery units are
said to be on alert.
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Transcript (May be auto-generated)
It's 10AM in Hong Kong this Monday, December 20. Mounting tensions on the Korean
Peninsula are weighing on Asian markets with Seoul shares tumbling more than 1%
along with the Korean Won hitting a four-week low against the greenback. Latest
reports indicate residents of South Korea's Jinpyeong and surrounding islands
being ordered to move into bunkers after announcing it'll go ahead with live
fire drills which will begin at 1PM local time, that's over 0100 GMT. Meanwhile,
the North raised an alert for artillery units positioned on the west coast.
Earlier, the UN Security Council added in an emergency meeting after failing to
agree on a resolution to mounting tensions. The US says disagreement among the
permanent members over how to resolve the situation are likely to be bridged.
Risks of an all-out conflict between the two Korea's are sending shares of
defense stock sharply higher with military equipment-maker Victek up almost 10%.
Reuters FX Analyst Krishna Kumar says investors should start to consider sending
up protection from the escalating situation. Investors remain blissfully
complacent about the rusting tensions in the peninsula. And I think there should
be a taking option protections because the vols are extremely quite relatively
low and they should be seeking option protection and the KOSPI as well as the
Won, just in case something happens over these next couple of days. In case they
don't want to do that, the better way of doing it would be buying the Dollar-Won
on any dip to 1,150. We shot around 1,163 in the one-month of Korean NDFs in New
York, buy any dips to 1,150. We have been in a range of 1,135 to 1,165. Expected
top side breakout, we have trend line resistance if you have to look at the
chart, around 1,168 to 1,170. We have initial resistance 1,180 but my target for
this move would be 1,190 to 1,210 a cluster of previous resistance as well as
the important Fibo numbers. That was Reuters Analyst Krishna Kumar in Sydney.
Now, staying with South Korea, the government unveiled further capital controls
on Sunday. Domestic lenders and foreign banks will now be levied on their
holdings of overseas debt.
Proceeds will be used in case a sudden reversal of capital flows dries up their
foreign exchange liquidity. On to other corporate news, China Xinmao will
announce later today whether it'll go ahead with its $1.3 billion bid for Dutch
cable-maker Draka. The offer is worth significantly more than the officially
endorsed bid from an Italian rival. Draka shares closed on Friday at a 6%
discount to Xinmao's offer, reflecting market uncertainties about the takeover
plan. One deal has already been scrapped this morning, that coming from
Australia where private equity giant KKR has aided takeover talks with asset
manager, Perpetual, sending their shares sharply lower. Stay tuned with Reuters
Insider as we continue to bring you the latest updates on the Korean crisis. I'm
Kei Okamura, this is Reuters