Inter-Korean shares rebound

By Lee Hyo-sik

Shares of companies in inter-Korean businesses rebounded sharply Monday on eased tensions between the two Koreas, following talks between high-ranking government officials from both sides.

Last week, inter-Korean stocks tumbled, weighed down by the escalating military confrontation between the two Koreas.

Analysts say if the South and North take concrete steps to ease heightened tension on the Korean Peninsula, shares of inter-Korean businesses will likely head upward.

But they caution that their ascent will be limited, given the overall market slump caused by the slowing Chinese economy, the planned U.S. interest rate hike and other external negatives.

“Shares of inter-Korean companies rose Monday, mainly on a technical rebound,” said Daniel Cho, head of research at Daishin Securities. “On Aug. 20-21, the stocks plunged on the aggravating inter-Korean relations. It is really hard to project how things unfold as far as inter-Korean matters are concerned. But given what has happened in the past, the two Koreas will not choose a path toward further confrontation and take some measures to alleviate tension.”

“If this is the case, there is no reason for investors to stay away from shares of inter-Korean companies,” he said.

But Cho warned that inter-Korean shares will not go up extensively because the ongoing market slump continues to weigh on investor sentiment.

“The global stock market has been hammered by fears of China’s slowdown, among others,” he said. “If the U.S. Federal Reserve does decide to raise the key interest rate, this would do some real damage to Korean and other equity markets across the globe.”

On Monday, shares of Hyundai Merchant Marine, the majority stakeholder of Hyundai Asan, which is Hyundai Group’s North Korea business unit, hit a daily limit high of 29.94 percent to close at 6,510 won. The benchmark KOSPI dropped 2.47 percent, or 46.27 points, to 1,829.81.

Emerson Pacific Group, which owns Kumkang Ananti Golf and Spa Resort, an 18-hole golf course and resort complex just north of the Demilitarized Zone (DMZ), saw its shares close trading, up 7.1 percent at 33,200 won.

Shares of Ehwa Technologies Information, an electric device maker doing business in the North, soared 23.1 percent to 373 won, while Romanson, a watchmaker operating a plant at the Gaeseong Industrial Complex, saw its shares rise 5.77 percent to 11,000 won.

High-ranking officials from the two Koreas have been engaged in talks since Saturday to defuse the mounting tension. But they have not been able to reach any agreement.

On Aug. 10, the South resumed loudspeaker propaganda broadcasting along the DMZ after two South Korean soldiers were maimed by North Korea-planted land mines.

Last Thursday, the North fired guns across the DMZ and the South retaliated by firing dozens of shells toward the North’s military posts, pushing military tension to its highest since the end of the Korean War.