North Korea has begun fueling the rocket that will put a satellite in orbit sometime between April 12 and 16, Yonhap News cited space agency official Paek Chang Ho as telling a group of foreign journalists in the capital of Pyongyang. The launch, set to mark the 100th anniversary of the birth of state founder Kim Il Sung, is on schedule, Paek was quoted as saying
The totalitarian regime maintains the event doesn’t violate a February deal to end long-range missile and nuclear tests in return for 240,000 tons of U.S. food. Secretary of State Hillary Clinton yesterday reiterated calls for North Korea to halt the launch plans, which have roiled markets.
“We share a strong interest in stability on the Korean peninsula,” Clinton told reporters after meeting in Washington with Japanese Foreign Minister Koichiro Gemba yesterday. “Strength and security will not come from more provocations but from North Korea living up to its commitments and obligations.”
Concern that the event is a cover for a missile test drew warnings from Gemba, who said the launch “would obviously be a violation of United Nations resolutions.” China and South Korea also have expressed concerns with the plans, which come less than four months after Kim Jong Un succeeded his father Kim Jong Il as leader.
Market Impact
A South Korean intelligence report that warned the regime is preparing to test an atomic device to follow on the heels of its rocket launch contributed to declines in the benchmark Kospi stock index this week.
While markets are closed in South Korea today for National Assembly elections, three-month non-deliverable forwards on the won declined 0.2 percent to 1,151.30 per dollar as of 1:30 p.m. in Hong Kong, according to data compiled Bloomberg. They touched 1,155.83, the weakest level since Jan. 17.
Debate also has centered on the prospect that North Korea may follow any launch with a nuclear test. Activity at North Korea’s Punggye-ri atomic testing site is consistent with preparations for previous detonations in 2006 and 2009, according to the intelligence report obtained April 9 by Bloomberg News.
Speaking to the U.S. Naval Academy in Annapolis, Maryland, after meeting with Gemba, Clinton yesterday said “recent history strongly suggests that additional provocations may follow.”
Nomura Securities warned that although the missile launch alone would have a limited effect on the South Korean bourse or currency exchange rates, market uncertainties could be exacerbated depending on the reaction from the international community.
Considering that North Korea’s new leader Kim Jong-un’s governing style is not much different from his father’s, Pyongyang will go ahead with the missile launch despite the hardscrabble lives of its people, Nomura said.
Financial market instability will grow if the North conducts a nuclear test or makes highly provocative moves like the shelling of a border island in 2010 in resistance to international sanctions, according to Nomura.
It is a dominant view among South Korean market watchers that the North’s proposed missile test is only a short-term risk to the local stock market.
“A temporary shock on the day of the launch is inevitable, but I don’t think the missile test alone would have any additional impact afterward,” said Han Chi-whan, an analyst at KDB Daewoo Securities.
“The local stock market could fluctuate heavily, however, depending on the direction of the negotiations for the North’s denuclearization after the missile test.”
When Pyongyang fired a long-range missile on a Sunday in April 2009, the KOSPI gained 1.1 percent to close at 1297.85 points the next day.
The KOSPI fell 3.43 percent when the North announced the death of its leader Kim Jong-il on Dec. 19, but recovered within two days.
“It has been quite some time since the local bourse has not responded to North Korean factors,” said Park Jung-woo, an analyst at SK Securities.
“Once stock prices drop due to the missile launch, it could even be an opportunity to buy.”
The Korean won fell against the U.S. dollar for two days in a row on Monday, but market observers attribute it more to the disappointing U.S. employment figures announced last week and the deepening fiscal crisis in Spain, rather than the North Korean missile launch plan.
Finance Minister Bahk Jae-wan said Tuesday the geopolitical risks posed by Pyongyang’s missile test plan will be limited and that the Seoul government will take swift action, if necessary, to reduce repercussions.
“Our financial market has the fundamentals to withstand unfavorable conditions such as the eurozone debt crisis and the death of former North Korean leader Kim Jong-il last year,” Bahk said.
“The government is closely observing internal and external factors of uncertainty, and will take appropriate measures if necessary.”
‘Timing is Impeccable’
Analysts said the totalitarian state may be seeking to sway the outcome of today’s parliamentary elections in South Korea across the demilitarized zone.
“The timing is impeccable,” said Park Young Ho, senior research fellow and director at the Korea Institute for National Unification. “Kim Jong Un is taking advantage of the domestic North Korean celebrations of Kim Il Sung to aggressively influence South Korean elections.”
Polls indicated South Korea President Lee Myung Bak’s party may lose control of the National Assembly to an opposition coalition that has pledged to improve ties with its northern neighbor. Opposition lawmakers accused the government of using the intelligence report to influence the elections.
North Korea’s ruling Workers’ Party meets today and may appoint Kim Jong Un the new party chief in one of the final steps marking his succession after the Dec. 17 death of his father, Kim Jong Il.
‘Serious Violations’
The Obama administration has said firing the rocket would breach the February food deal, which included a North Korean pledge to halt uranium enrichment at its facility in Yongbyon.
“It would be impossible to imagine” the U.S. would follow through on the food aid if North Korea proceeds with the launch, President Barack Obama’s spokesman Jay Carney said yesterday. The rocket “would represent clear and serious violations” of UN resolutions, he told reporters traveling with Obama in Florida.
North Korea’s government says it is putting a “peaceful” satellite into orbit and that it doesn’t violate the deal. Ryu Kum Chol, a North Korean space official, dismissed as “nonsense” assertions that the satellite launch is aimed at developing missile technology, the AP said. Ryu said the communications satellite is fitted with a camera to monitor weather conditions.
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