August 29, 2017 / 6:43 AM / 10 months ago

S.Korea stocks, won skid after new North Korea missile launch but pare losses

    * North launches missile over Japan in fresh provocation
    * KOSPI slumps over 1 pct soon after opening, pares losses
    * Absence of market momentum makes investors react more
sensitively -analyst
    * Will monitor and act according to contingency plans -fin

 (adds risk measures, updates figures)
    SEOUL, Aug 29 (Reuters) - South Korean shares and the won
fell on Tuesday after North Korea fired a missile over Japan in
one of its most provocative acts yet, escalating global tensions
over the peninsula after a short period when nerves seemed to be
calming down.             
    Both stocks and the won clawed back some of their early
losses later in the session, however, as markets waited to see
how U.S. President Donald Trump and the United Nations Security
Council would respond.
    Trump did not fire off a quick blistering warning to
Pyongyang as he did earlier this month, though Japanese Prime
Minister Shinzo Abe and other leaders condemned the launch.
    The Korea Composite Stock Price Index (KOSPI)         
closed down 0.2 percent at 2,364.74 points, after falling more
than 1 percent in early trade.
    The won            was quoted at 1,126.4 to the dollar at
the conclusion of onshore trade, down 0.6 percent compared to
Monday's close of 1,120.1. It touched as low as 1,128.7 earlier
in the session. 
    South Korea's finance ministry said it will monitor
financial markets and act to stabilise markets if needed.
    "All sectors are tumbling, which clearly shows that North
Korea risks are the reasons behind it," said Cho Byung-hyun, a
stock analyst at Yuanta Securities.
    Cho said investors were reacting more strongly than usual to
North Korean sabre-rattling, given the last bout of U.S.-North
Korea tensions had only just begun to ease.
    Some measures of risk, however, showed that the market
participants were as not as worried as earlier this month when
conflicts between Washington and Pyongyang were at the peak.
    The spread on South Korea's 5-year credit default swaps
                stood at 61.5 basis points, well below 68.9
basis points on Aug. 14. 
    Risk reversals in won options            held at 2.1 points,
also much lower than 2.8 points in mid-August.
    Samsung Electronics             continued to weigh on the
benchmark index, falling as much as 1.7 percent. 
    Samsung Electronics Vice Chairman Jay Y. Lee, who was given
five-year jail term on Friday for bribing ousted President Park
Geun-hye, filed an appeal on Monday.             
     "In the case of Samsung Electronics, continued foreign
worries about a leadership vacuum seem to be putting more
pressure on the shares," he added.
    Shares of defense-related firms gained. Firstec            
rose nearly 2 percent while Victek             surged 11
    Offshore investors unloaded more KOSPI shares, selling 264.3
billion won ($234.81 million) worth, weighing on the index. 
    Decliners far outnumbered advancers 609 to 191.
    September futures on three-year treasury bonds         shed
0.01 point to 109.25.

 (Reporting by Dahee Kim; Editing by Richard Pullin and Kim
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