'Inter-Korean shares' plunge after summit canceled

By Jhoo Dong-chan

Stocks closed lower Friday after U.S. President Donald Trump canceled the U.S.-North Korea summit scheduled for June 12. Shares in firms related to inter-Korean economic cooperation plunged the most, dragging down construction stocks.

“Uncertainty is inevitable over the relationship with North Korea in the short term,” said analyst Kim Young-hwan

“Panic selling isn't recommended _ taking a wait-and-see approach is more appropriate.”

Daishin Securities analyst Lee Kyoung-min agreed.

“U.S. President Trump's announcement will deal a blow to stocks for sure in the short term,” he said.

“There is also the possibility of foreign investors' exit if the exchange rate between the U.S. dollar and the Korean won fluctuates further.”

Shinhan Investment Corp. analyst Kim Yoon-suh said there should be confidence in “inter-Korean shares” over the long term.

“The June 12 summit between the two leaders has been canceled, but I believe it's a part of a process to narrow their differences,” Kim said.

“It is inevitable for inter-Korean shares to plummet to the bottom in the short term, but talks between the two countries will resume at some point. Shares related to inter-Korean economic cooperation will pick up again.”

The benchmark Kospi fell 14.15 points, or 0.57 percent, to 2,451.86 within 15 minutes of the market opening. The index closed at 2,460.80, down 5.21 percent from the previous session.

The tech-heavy Kosdaq also opened lower at 866.2, down 7.12 points, or 0.82 percent, from its previous day opening. It recovered somewhat to close at 868.35.

Inter-Korean shares led the fall.

Shares in Hyundai Engineering & Construction (E&C), which pioneered major projects in North Korea, fell to 61,500 won at 10 a.m., down 8.89 percent. They closed at 60,900 won, down 9.78 percent.

Namkwang Engineering & Construction, which has ties with the Gaeseong Industrial Complex (GIC), also suffered a 15.54 percent plunge to 20,650 won at the opening. They closed at 19,950 won.

Firms which had operated in the GIC also suffered big falls.

Shares in underwear maker Good People closed at 4,630, down 22.05 percent; while fashion brand In The F plunged 17.81 percent to 2,100 won.

Railways and train makers Hyundai Rotem and Busan Industry also suffered a 19.19 percent and 22.73 percent plunge to 28,000 won and 119,000 won, respectively.

On Thursday, U.S. President Trump canceled his planned summit with North Korean leader Kim Jong-un, saying the decision was made because of a threatening statement from Pyongyang.

Trump's decision came after North Korean Vice Foreign Minister Choe Son-hui called U.S. Vice President Mike Pence “ignorant and stupid.”