September 4, 2017 / 2:48 AM / 7 months ago

UPDATE 2-S.Korea stocks, won slide as N.Korea's 6th nuclear test sparks fresh fears

    * N.Korea conducts its most powerful nuclear test on Sunday
    * KOSPI opens down 1.7 pct; won down 0.7 pct
    * Foreign investors' stock purchases stem further losses
    * Exports show fundamentals not hurt by N. Korea risks

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    SEOUL, Sept 4 (Reuters) - South Korean shares and the won
fell early on Monday as North Korea's sixth and most powerful
nuclear test to date sent the local bourse to a three week low.
    The Korea Composite Stock Price Index (KOSPI)         was
down 0.6 percent at 2,343.83 points as of 0204 GMT. The index
opened 1.7 percent lower at 2,316.89, its lowest since Aug. 11.
    The won            was quoted at 1,131.8 against the dollar,
down 0.8 percent compared to the previous close of 1,122.8. It
was also the weakest intraday trading level in almost two weeks.
    Kim Hyung-ryeol, a stock analyst at Kyobo Securities, says
the latest test has injected fresh uncertainty into financial
    "It is too early to predict the KOSPI's next direction as
geopolitical risks regarding North Korea could increase South
Korean markets' volatility this month along with major central
banks' policy meetings," said Kim.
    Major market heavyweight stocks declined with SK Hynix
            down nearly 1 percent and web portal Naver
            down 2.7 percent.
    Risk reversals in won options           , used to hedge
against volatility in the currency, edged up to 2.4 points while
the spread on South Korea's 5-year credit default swaps
                escalated to 62.9 basis points from Friday's
60.0 basis points.     
    Offshore investors, however, were set to be net buyers of
KOSPI shares near mid-session, helping the index to pare some of
its earlier losses.
    Foreign investors bought a net 94.1 billion won ($83.17
million) worth of domestic shares.
    "North Korea's latest nuclear test is taking a toll on
overall Seoul bourse but last week's robust exports especially
are assuring investors that the fundamentals of local economy
are not hurt," Kim said.
    South Korea's exports marked their longest run of growth in
almost six years in August, highlighting a nascent normalisation
in global demand.             
    September futures on three-year treasury bonds         fell
0.09 point to 109.20.
                       0204 GMT    Prev close
 Dollar/won             1,131.8       1,122.8
 Yen/won             10.3126/53       10.2437
 *KTB futures            109.20        109.29
 KOSPI                 2,343.83      2,357.69
 * Front-month futures on three-year treasury bonds

 (Reporting by Dahee Kim; Editing by Sam Holmes)
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