Geopolitical risks not to have significant impact on S. Korean economy: official

Geopolitical risks on the Korean Peninsula, caused by the Democratic People's Republic of Korea (DPRK)'s nuclear test and long-range rocket launch, will not have a significant impact on the South Korean economy, a senior Seoul financial regulator said Monday.

Finance Services Commission (FSC) Vice Chairman Jeong Eun-bo told foreign correspondents in Seoul that risks from inter-Korean relations alone would not aggravate the risk of South Korea's economy as seen in the past.

The joint U.S.-South Korea annual war games, which the DPRK has denounced as a dress rehearsal for northward invasion, kicked off on Monday, but its impact on South Korea's economy will be limited, Jeong said.

The joint drills, code-named Key Resolve and Foal Eagle, are scheduled to run through April 30, mobilizing the largest-ever military forces from Seoul and Washington that include an array of U.S. strategic assets such as a nuclear-powered aircraft carrier and a nuclear-capable submarine.

In response to the drills, the DPRK warned of "pre-emptive and aggressive nuclear strikes" against South Korea and the U.S. mainland, calling the war games as "undisguised nuclear war drills."

Tensions mounted on the Korean Peninsula as the DPRK tested what it claimed was its first hydrogen bomb, the fourth of its nuclear detonations, on Jan. 6 and went ahead with the launch of a long-range rocket, which was condemned by outsiders as a banned test of missile technology, on Feb. 7.

Foreign funds flowed out of the South Korean financial markets amid the heightened geopolitical risks, but the foreign capital outflow was in line with the global market trend, the FSC vice chief said.

Jeong said that foreign investors sold South Korean bonds as part of deleveraging last month in preparation for potential liquidity risks, while offloading local stocks amid the deepening risk-averse sentiment.

However, the local bond sell-off reduced significantly and foreign capital began to flow into the South Korean stock market recently, Jeong added.

The main Kospi index inched up 0.11 percent on Monday, and South Korea's currency went up to close at 1,201.4 won per dollar. Enditem