But some analysts expressed the view that positive developments in inter-Korean relations could stimulate long-term market growth.
Bond markets were moderately bearish in closing. The three-year sovereign bond yield climbed up 13 basis points, while the five-year bond yield surged 17 basis points. A rise in bond yields translates into a fall in bond prices.
The dollar-to-won exchange rate was 3.4 won lower in Tuesday session’s close, compared to Monday, meaning the local currency had strengthened.
For Park Hyung-joong, an analyst at Daishin Securities, it all comes down to whether the summit between South Korean President Moon Jae-in and North Korean leader Kim Jong-un produces tangible results, such as plans for inter-Korean business cooperation.
“For the time being, the news about the inter-Korean summit will not serve as long-term momentum for the market, until the two Koreas unveil a concrete plan for inter-Korean business cooperation,” he told reporters.
While predicting that the inter-Korean detente will lead to another North Korea-US summit, Kim Ji-hyung, an analyst at Hanyang Securities, said the talks between the two Koreas are likely to fall short of having an immediate impact on the market.
“The easing of sanctions against North Korea is a prerequisite for the implementation of inter-Korean cooperation,” Kim wrote. “Being too optimistic would be premature.”
Another analyst, Kim Il-hyuk of KB Securities, wrote in a note Tuesday that an agreement on inter-Korean exchange will not boost the market unless it is accompanied by either a breakthrough in North Korean denuclearization or a military pact defusing tensions on the Korean Peninsula.
“It will be a negative situation if the (summit) fails to yield a comprehensive agreement on defense along with denuclearization and stops short of an agreement on inter-Korean exchanges,” Kim wrote.
But lasting momentum is likely if there is another summit between the North’s Kim and US President Donald Trump.
“If inter-Korean business cooperation takes shape, infrastructure companies will not be the only beneficiaries,” Kim of KB Securities wrote.
By Son Ji-hyoung