ASIA MARKETS: Asian Markets Retreat As Saber-rattling Over North Korea Intensifies

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08/09/2017 | 02:44 am


By Kenan Machado



Nikkei drops 1.4% as yen rises; Samsung drags down Kospi



Caution hit markets in Asia on Wednesday as North Korea responded with its most specific threat yet against the U.S. following President Donald Trump's latest remarks on the Kim regime.



Before trading began, North Korean official media said Kim Jong Un ordered his military's strategic forces to carefully examine an operational plan for a missile strike on the U.S. military base in Guam.



That stoked buying of havens like gold and the Japanese yen, which was broadly up about 0.5% in Asia morning trading. Gold rose about 0.6% and U.S. Treasury yields turned lower.



The latest back-and-forth began after Trump warned North Korea on Tuesday against making more threats, saying it faces "fire and fury like the world has never seen."



As the yen rose, the Nikkei fell 1.4%. Currency gains often pressure the country's export-heavy stock market.



Meanwhile, South Korea's benchmark Kospi index fell 0.7% as the won fell about 0.5% against the dollar. Samsung Electronics (>> Samsung Electronics Co Ltd) , which makes up more than 20% of the index, fell 1.8%, while other major blue chips dropped similarly.



"What we are seeing in the past few hours is the market factoring in an increasing risk premium on equities and currencies" related to North Korea, Westpac senior currency analyst Sean Callow said.



Australian equities were a bright spot after underperforming yesterday. Bolstered by an upbeat start to the earnings season for the country's biggest banks, the S&P/ASX 200 index rose 0.5%.



Commonwealth Bank (>> Commonwealth Bank of Australia) , whose shares have faced pressure in recent days due to possible government action against it, rose 1.2% as fiscal-year earnings came in better than expected.



Australian stocks were also aided by weakening in the local currency, which has been among the best performers world-wide in recent weeks. The Australian dollar was broadly down about 0.5% and fell 1% against the yen.



The Australian dollar "is a risk-sensitive currency [that] has benefited recently from inflows into the region," Callow said. Worries make the currency "look less attractive," he added.





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