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North Korea provocations drained South's markets of $4.3B, Seoul says

By Elizabeth Shim
North Korea provocations drained South's markets of $4.3B, Seoul says
South Korea stock markets took a hit following North Korea provocations in August and September, according to Seoul’s central bank. Photo by Yonhap

Oct. 18 (UPI) -- North Korea's provocations have had a critical impact on foreign investment in South Korea, according to recent statistics.

According to data from the Bank of Korea, North Korea's sixth nuclear test and missile launches spooked investors, who sold about $4.3 billion in South Korean stocks and bonds in September, Yonhap reported Wednesday.

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The numbers indicate Asia's fourth-largest economy is vulnerable despite signs most South Koreans believe the North's provocations do not have an impact on their daily lives.

It is the largest amount of foreign investment outflow from the South in six years, when the European debt crisis in August 2011 triggered a global selling of stocks and bonds, according to Newsis.

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In August of that year, net outflow reached $4.61 billion.

In August 2017, a period of unprecedented tensions on the peninsula, foreign capital outflow reached $3.25 billion.

"Net outflows of foreign equity investment funds continued owing to profit taking and increased risk from North Korea," the Bank of Korea said in its report.

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But investor sentiment recovered in October, after North Korea provocations subsided, and foreign capital inflows began to return to the domestic South Korean stock market.

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The South Korean currency has also weakened against the dollar, falling to 1,145.4 won to the dollar in late September, from 1,127.8 won to the dollar in late August.

North Korea continued to refrain from provocations on Wednesday, sending a message of congratulations instead to Beijing on the occasion of its 19th Communist Party congress.

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China had banned independent North Korea reporting out of concern for tests that would disrupt the ceremonies.

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