Viewing cable 06SEOUL3442
Title: FINANCIAL MARKETS REBOUND DAY AFTER DPRK,S

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06SEOUL34422006-10-10 10:00:00 2011-08-30 01:44:00 UNCLASSIFIED//FOR OFFICIAL USE ONLY Embassy Seoul
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TAGS: ECON EFIN EINV PREL KS KN
SUBJECT: FINANCIAL MARKETS REBOUND DAY AFTER DPRK,S 
REPORTED NUCLEAR TEST 
 
SUMMARY 
------- 
(SBU) Korean financial markets posted a fledgling but solid 
recovery the day after North Korea,s reported nuclear test. 
Equity indices jumped, buoyed by continued bullish sentiment 
among chiefly institutional and foreign investors.  The 
won/dollar rate stabilized, as panic-driven dollar buying 
subsided. Some DPRK economic and tourism projects were put on 
hold, as public and private sector leaders adopted a 
cautious, &wait and see8 approach.  Many analysts believe a 
short-term recovery will continue but it hinges on 
international reactions to the evolving situation.  END 
SUMMARY. 
 
BOURSES AND WON UP... 
--------------------- 
(SBU) On October 10, the ROK,s equity markets closed higher, 
chiefly due to massive foreign investor buying and a strong 
rebound in tech blue chips.  The benchmark Korea Composite 
Stock Price Index (KOSPI) rose 0.7 percent, to close at 
1,328.37.  The tech-heavy Kosdaq index jumped 2.8 percent to 
finish at 554.70.  The won closed at 959.30 to the U.S. 
dollar, down 0.48 percent, from Monday,s close (963.9), as 
panic-driven dollar buying subsided. 
 
...FOREIGN INVESTORS TO THE RESCUE 
---------------------------------- 
(SBU) Exploiting the 2.41-percent KOSPI drop on October 9, 
foreign and institutional investors continued their net 
equity purchases today.  Foreign investors bought 90 billion 
won (USD 94 million), after buying 128 billion won (USD 133 
million) on October 9.  This buying trend is widely viewed as 
a strong recovery engine that will counter-balance and 
eventually calm retail investor selling, according to our 
contacts. 
 
WAIT TO SEE ON NORTH KOREAN VENTURES 
------------------------------------ 
 
(SBU) Hyundai Asan Corporation (HAC), operator of the Mount 
Geumgang tours and primary contractor for infrastructure 
development of the Kaesong Industrial Complex,s (KIC) Pilot 
Phase, seems to be taking a &wait and hope for the best8 
outlook for its North Korea operations following the DPRK's 
October 9 claims of a nuclear test. 
 
(SBU) HAC senior vice president Jang Whan-bin told us more 
than three hundred people had cancelled reservations for 
Mount Geumgang but they were mostly provincial and city 
government officials.  Since most of these officials are 
opposition Grand National Party (GNP) members, their 
cancellations may reflect a GNP decision, not independent 
ones by local government groups. 
 
(SBU) October is a peak month for HAC,s Mount Geumgang 
reservations.  Jang told us that he did not expect the DPRK 
to do anything to discourage those bookings since it receives 
an average of USD 50 per tourist.  He added that he had heard 
nothing from ROKG officials about HAC,s operations in North 
Korea and that the plan was to continue with business as 
usual until told otherwise.  On the other hand, Korea Tourism 
Organization President Kang Kwang-ho noted plans for new 
Mount Geumgang tourism programs are &all in the air now.8 
In a related development, the Ministry of Unification 
confirmed that it had halted a flood aid shipment of 4,000 
tons of concrete to the DPRK in the wake of the nuclear test 
announcement. 
 
COMMENT 
------- 
(SBU) Over the near term, ROK financial markets may remain 
stable (albeit with fluctuations within a range), as 
investors assess international reactions to the evolving DPRK 
situation.  Over the longer term, all of our interlocutors 
stressed the importance of international reactions that will 
play into the evolving situation.  END COMMENT. 
VERSHBOW