The Washington Post

Rumor of N. Korean nuclear explosion prompts brief stock panic in South

TOKYO — A rumor that an explosion occurred at North Korea’s Yongbyon nuclear facility set off a brief panic Friday in the South Korean stock market, illustrating one of the ways in which Seoul is vulnerable to its neighbor.

The cylinder sections in this Nov. 3, 2011 satellite image of a North Korean nuclear reactor in Yongbyon suggested that the building is nearly complete. (DigitalGlobe Analysis Center)

Still, the rumor reflected concerns — often discussed among nuclear experts — about the unregulated nuclear activity in the North; the possibility that North Korean technicians would struggle to contain an accident if one occurred; and the widely held belief that the government in Pyongyang would neglect to warn the region about spreading radiation.

In this case, the rumor caused the South Korean stock market to dip and the won to weaken against the dollar. South Korea’s financial regulator asked police to investigate the source of the rumor, and said he believed it may have been spread by someone who wanted to profit by manipulating the market.

According to South Korea’s Yonhap news agency, the rumor cited information from an unidentified Japanese intelligence source stationed in North Korea. Yonhap said that the rumor quickly spread among securities firms and on the Internet, starting shortly after 2 p.m. But it gave no specifics about how or where the rumor originated.

The KOSPI Composite Index plummeted for almost 15 minutes. But it recovered those rumor-fueled losses before the end of the trading day.

At Yongbyon, North Korea’s major nuclear facility, reactors used in earlier decades have long been shut down or abandoned. But satellite images show that the secretive authoritarian country is building a new 25- or 30-megawatt light-water reactor, apparently as part of its vow to boost its uranium-enrichment program. Construction could be finished within two or three years, outside experts say. At the same site, North Korea also has a modern uranium-enrichment facility with some 2,000 centrifuges.

The country expelled international nuclear inspectors in 2009.

Before the Dec. 17 death of North Korean leader Kim Jong Il, the Obama administration was pushing for more engagement with Pyongyang, offering to resume shipments of food aid — potentially in exchange for concessions in the North’s nuclear program. But those talks are on hold as North Korea’s new young leader, Kim Jong Eun, tries to secure power and win the loyalty of the older elites who surround him.

On Thursday, North Korea’s state-run news issued its first statement about its nuclear program since Kim Jong Il’s death, describing the weapons as a tool to “protect its sovereignty and dignity.”

“As recognized by the world,” the news agency said, “the DPRK is a full-fledged nuclear weapons state and its nuclear deterrent is the revolutionary heritage which can never be bartered for anything.”

View Photo Gallery: A rare look inside North Korea as seen by photographer David Guttenfelder.

More world news coverage:

- In Iran, a sense of impending war

- As elections approach, Kazakhstan keeps a tight lid on protests

- 25 killed in explosion in Syrian capital

- Read more headlines from around the world

Chico Harlan covers personal economics as part of The Post's financial team.



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