Investors Flee to Safe Havens as N.Korea Tensions Flare

  • By Kim Kyung-eun

    September 07, 2017 12:39

    Investors are scuttling to safe-haven assets like gold as tensions flare on the Korean Peninsula after North Korea's sixth nuclear test.

    Gold prices have soared to record levels since early this year, while the Japanese yen and Swiss franc are also soaring in value. Funds are quickly exiting the stock market and other volatile investments.

    Foreigners pulled W1.87 trillion out of the domestic stock market over the past month (US$1=W1,136). "A growing number of investors are tired of the extended market volatility," said Park Sang-woo at Yuanta Securities.

    International gold prices have surged 16.5 percent so far this year. Domestic gold retail prices reached W196,000 per 3.75 g. Korea imports most of its gold.

    "Gold prices usually hover at around $1,100 to $1,200 but have surged to $1,340 after North Korea-related tensions flared," Jang Hyun-chul at Samsung Securities said. "But investors are becoming increasingly accustomed to the North Korean risk so further increases are unlikely."

    The yen strengthened from 110.25 to the dollar before the nuclear test to 108.7 on Wednesday. The Swiss franc also strengthened from 0.9648 per dollar to 0.9549.

    At the start of the year, the yen stood at 116.96 and the franc at 1.019. The franc is more favored than the yen now that even Japan falls within range of North Korean missiles.

    But a majority of analysts project appetite for safe-haven assets to wane in a while. Oh On-soo at KB Securities said, "The North Korean risk persisted for the past month, but most other newly emerging markets fared well."

    "The North Korea risk is not a negative factor in economic fundamentals unless war breaks out, so investors will shift their focus back to corporate earnings once the crisis phase passes," Oh added.

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