Singapore: Asian shares fell on Wednesday and the euro hovered near a two-month low to the dollar as regional stocks caught up with a sharp sell-off after North Korea’s deadly shelling of a South Korean island and investors sought safety in the US currency.
The artillery barrage on Tuesday, one of the most serious incidents on the divided peninsula since the end of the Korean war in 1953, boosted other safe haven assets, with gold holding most of Tuesday’s gains and Japanese government bond futures gaining.
Korean bond futures rose and the won currency fell 2%. Market reactions to tensions with prickly North Korea tend to be short-lived, and data showed foreign investors were net buyers of South Korean stocks and bond futures.
“Korea trades at a discount to the region on a valuation basis ... If you look back at the last five years when we’ve had scares they were all seen as buying opportunities,” said Todd Martin, Asia equity strategist with Societe Generale.
“The rule among hedge funds and long-only funds is that you let the market sell off and watch for your entry point to get involved.”
The euro and global equities markets had already been under pressure as investors feared a rescue package for Ireland may not stop a debt crisis from spreading to other euro zone countries.
Tokyo’s Nikkei , which did not trade because of a holiday on Tuesday, fell 1.5% and the benchmark index in South Korea , where the trading day was ending when news of the North Korean attack broke, fell 1.2%.
MSCI’s index of Asia Pacific shares outside Japan fell 0.4%. U.S. share markets had fallen on Tuesday, with the S&P 500 index dropping 1.4 %.
The euro , which had tumbled 1.9% overnight, steadied a little to trade around $1.34. The dollar surged to 1,170 won from around 1,125 on Tuesday, and was later changing hands around 1,153.
Benchmark Japanese government bond futures rose 0.24 point and the 10-year yield edged down 1 basis point.
Spot gold edged down 0.2% to $1,372.95 an ounce, after touching a 1-1/2 week high of $1,382 in the previous session, and US crude oil futures rose 15 cents to $81.40 a barrel.