HONG KONG: South Korean stocks and the won led most Asian markets lower Friday after the North conducted another nuclear test, while trading was also hit by worries over global central bank policy easing.
Pyongyang said it had conducted a “successful” fifth nuclear test, which South Korea said was its largest-ever.
The news intensified worries about geopolitical tensions in the region as world powers including China struggle to rein in Pyongyang’s erratic behavior.
Seoul’s KOSPI was down 1.5 percent in the afternoon while a Bank of Korea decision not to cut interest rates was unable to prevent the won sinking almost one percent early on, before it edged back slightly.
The losses led a sell-off around most of the region with Sydney and Singapore each down 0.9 percent, while there were also sharp falls in Taipei, Jakarta and Manila.
Japan’s Nikkei recovered from early losses to end marginally higher.
Adding to pressure on equities were worries about central bank inaction in dealing with a slowdown in the global economy.
On Thursday, the European Central Bank opted against fresh stimulus, with its president Mario Draghi calling for “patience” to see the effect of vast amounts of cash already injected into the system.
While he had not been expected to announce any action, there was disappointment Draghi did not provide any forward guidance, while some analysts said the bank was possibly planning new measures as its bond-buying program runs out of assets to buy.
Tokyo-based dealers are also concerned at the lack of movement from Japan’s central bank ahead of a policy meeting later this month, despite another weak growth reading Thursday and a general malaise across the economy.
Oil prices sink
“The ECB, and many central banks now, look to be taking more of a measured approach to additional policy easing compared with the not-too-distant past,” Philip Borkin, a senior economist at ANZ Bank New Zealand, said in a client note.
“This is only natural, of course, as monetary policy delves further into the unknown.”
Hong Kong stocks closed up 0.8 percent at a 13-month high as traders welcomed news that mainland Chinese authorities would allow the country’s insurers to invest in the city’s stock market.
The gains extended the previous day’s advance fuelled by news of the first rise in Chinese imports for 22 months.
Shanghai fell 0.6 percent despite figures showing the producer price index—a measure of the cost of goods at the factory gate—fell at its slowest pace in more than four years.
On currency markets, the euro rose to $1.1275 from $1.1261 in New York following the ECB’s decision not to ease policy, while traders also welcomed its slight improvement on economic growth this year.
The uncertainty sparked by Pyongyang’s nuclear test sent higher-yielding, risker, currencies lower as dealers sought safety. Australia’s dollar fell one percent, while the Indonesian rupiah slipped 0.3 percent. Malaysia’s ringgit and the New Zealand dollar also sank.
Oil prices retreated after surging Thursday on the back of data showing a sharp fall in US stockpiles.
West Texas Intermediate eased 55 cents to $47.07, while Brent slipped 59 cents to $49.40. The two contracts each rose more than $2 on Thursday.
The US Department of Energy said inventories slumped by 14.5 million barrels last week, the biggest fall for 17 years.
However, the decline was attributed to the suspension of imports and shutdown of some production due to Hurricane Hermine, which passed through the Gulf of Mexico in late August, and there were warnings of a rebound next week.
In early European trade London and Paris each dipped 0.2 percent while Frankfurt lost 0.3 percent.
Key figures around 0800 GMT
Tokyo – Nikkei 225: UP 6.99 points at 16,965.76 (close)
Shanghai – Composite: DOWN 0.6 percent at 3,078.85 (close)
Hong Kong – Hang Seng: UP 0.8 percent at 24,099.70 (close)
London – FTSE 100: DOWN 0.2 percent at 6,842.81
Pound/dollar: UP at $1.3313 from $1.3295 late Thursday
Euro/dollar: UP at $1.1275 from $1.1261
Dollar/yen: DOWN at 102.04 yen from 102.48 yen
New York – DOW: DOWN 0.3 percent at 18,479.91 (close)