Kim Jong-Il Death Rumor Roils Korean Stocks

A rumor that North Korean leader Kim Jong-il had died drove down the Korean stock market and sent the won falling Tuesday afternoon. The rumor apparently hit investors at around 2:20 p.m. and sent the KOSPI down to close at 1,903.14, 15.96 points below Monday’s close.

The rumor caused defense stocks to surge. S&T Dynamics, which makes weapons and aviation systems, closed up 6% at W15,900, while Speco, which makes fin stabilizers for naval destroyers, ended up 4.2%. Embedded systems developer MDS Tech gained 3.7%, and Huneed Technologies, which makes communication and security systems, rose 3.5%.

The won slipped W4.1 from Monday to W1,121 per dollar. It had been gaining slowly before the rumor hit.

“The North Korean media reported a public appearance by Kim just yesterday,” said a Unification Ministry official, discounting the rumor. “We have detected nothing unusual.”

On Monday North Korea’s official Korean Central News Agency reported that Kim and his son Jong-un visited an air force base.

“If investors had taken these rumors seriously, the market would have reacted more severely,” said Kim Hak-kyun of Daewoo Securities. “The rumors spread through on-line messaging services and were viewed more as gossip, so the impact wasn’t that big.”

Several rumors shot through global stock market Tuesday. Israel was said to be on the verge of attacking an Iranian nuclear facility. A major Japanese bank was said to be in crisis due to exposure to European bonds. A top U.S. power company was said to be seeking bankruptcy protection due to falling utility prices.

“None of these rumors are confirmed,” said Han Bum-ho at Shinhan Investment Corporation. “It looks like investors’ imagination went wild with just 10 days to go before options expire.”