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Stocks bounce amid US-NK saber-rattling

South Korea’s stock market indexes swung back to positive territory Monday, recovering from a bearish trend last week fueled by the United States’ verbal saber-rattling at North Korea in response to its plans to attack US territory with ballistic missiles.

The top-tier Kospi closed at 2,334.22, up 0.63 percent from Friday’s close, while the tech-heavy Kosdaq rose 0.16 percent.

Foreign investors maintained the selling trend for four consecutive days on the main bourse Monday, but their net sales of 252 billion won ($221.1 million) in stocks was overshadowed by net institutional purchases of stocks worth 357 billion won.

The local currency strengthened by 3.8 won against the dollar at Monday session’s close from Friday. It traded at 1,139.7 won against the greenback.

US President Donald Trump’s phone call Saturday with China‘s President Xi Jinping to confirm a common goal to denuclearize North Korea sent the markets into a recovery phase, analysts said Monday.

“(The phone call) allowed North Korea’s missile threat to wane, as it did in April,” Ma Ju-ok, an analyst at Hanwha Investment & Securities, wrote in a Monday report, citing a call on April 12 this year that put the brakes on a six-day losing streak for the Kospi after a North Korean missile test.

Some other analysts, however, said the North Korea threat would endure.

“The lingering tension on the Korean Peninsula will be inevitable until mid-August, when North Korea claimed it would fire at the US territory of Guam and the Korea-US joint military exercise Ulchi Freedom Guardian takes place,” Kim Ji-hyung, a strategist at Hanyang Securities, wrote in a Monday note.

Uncertainties from North Korea have for decades rattled local markets. The Kospi saw a 3.4 percent plunge on the date of previous North Korean leader Kim Jong-il’s death in December 2011. It also dropped 2 percent and 2.3 percent, respectively, from the two Koreas’ exchange of fire in August 2015 and the fifth nuclear test in September 2016.

But a string of North Korean missile threats posed little hurdle to a monthslong rally and foreign buying spree since President Moon Jae-in’s inauguration in May, until the US and North Korea upped the ante against each other with a war of words last week, causing a 3.3 percent slide in the Kospi for four days until Friday.

Meanwhile, Finance Minister Kim Dong-yeon said Monday he hoped to discuss ways to cope with impacts on the financial market with Bank of Korea Gov. Lee Ju-yeol on Wednesday.

By Son Ji-hyoung (