Cablegate: Financial Markets Rebound Day After Dprk,S

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E.O. 12958: N/A
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

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