SEOUL, Feb. 12 (Xinhua) -- Nuclear test conducted by the Democratic People's Republic of Korea (DPRK) will have a limited impact on the South Korean economy as market participants are accustomed to the geopolitical risk given the past experiences, the finance ministry said Tuesday.
"The economic pact that will be possibly caused by the North Korea (DPRK)'s nuclear test is forecast to be limited," the Ministry of Strategy and Finance said in a statement after holding an emergency meeting.
The past two nuke tests in 2006 and 2009 and the recent DPRK- related events had no material impact on the country's financial market, the ministry said, noting that concerns over the geopolitical risk tended to decrease gradually on learning effect.
The official KCNA news agency said that the DPRK has successfully conducted the third underground nuclear test in a " safe and perfect" way with a smaller and light A-bomb unlike the previous ones, yet with great explosive power.
The nuclear test, which the DPRK claimed was successful, was carried out at 11:57 a.m. local time in DPRK's Kilju County, North Hamkyung Province, where the DPRK nuclear test facility is located. Pyongyang conducted similar nuclear tests in 2006 and 2009.
Right after the news report on the test, the benchmark Korea Composite Stock Price Index (KOSPI) slid around 10 points before trimming losses to stay in a narrow and stable range. The main index fell 0.26 percent.
The South Korean currency even rose 4.9 won against the U.S. dollar to close at 1,090.8 won. Foreign funds raised their holdings of local stocks worth 135.3 billion won, more than doubling the amount purchased in the previous session.
"The domestic financial market kept a roughly stable trend as this nuke test was already anticipated," the Financial Services Commission (FSC), South Korea's financial regulator, said in a statement following an emergency meeting.
During the past two nuke tests, South Korean financial markets bounced back after days of short-term setbacks. The KOSPI rebounded seven days after falling 2.41 percent on Oct. 9, 2006 when the first DPRK nuke test was conducted. The key index shrugged off the geopolitical risk days after the second nuke test occurred on May 25, 2009.
The regulator, however, cautioned that the international community will highly likely strengthen sanctions against the DPRK as it conducted the test in defiance of oppositions, warning that the geopolitical risk would be elevated on the Korean peninsula, influencing negatively on the financial market.
The UN Security Council is scheduled to meet in an emergency meeting on the DPRK nuclear test on Tuesday morning. The meeting was called by South Korea, which holds the rotating council presidency for February.