North Korea's shelling on Tuesday of an island belonging to its southern neighbor hasn't spread alarm among foreign investors who say they have seen this kind of tension before.
Mutual funds hold shares in South Korean blue chip companies such as Samsung Electronics and Hyundai Motor and the escalation of tensions prompted fears investors would rush for the exits. "Unless there is significant escalation from here on inwards, I don't think this is something that is going to have a major sustained impact on the markets," said Brian Coulton, global emerging markets strategist at British investment manager Legal & General Investments.
While shares fell, investors put the artillery attacks in context of North Korea's history of isolated conflicts. What's more, the United States wasn't considering immediate deterrent action, and investors noted that the provocation fits into a pattern designed to draw attention rather than war.
"Investors know it's basically sabre-rattling," said Keith Springer, president of Springer Financial Advisors in Sacramento, California. "They needed a military victory to make his son (North Korean leader Kim Jong-Il's son and heir apparent) a hero. That's what the nation thrives on."
Jeffrey Sica, president of Morristown, New Jersey-based SICA Wealth Management, was preparing clients for a resurgence in commodities prices that might come as a result of instability in the region.
China will likely be wary of raising its interest rates if this crisis unfolds further, leaving the yuan artificially low and growth unchecked, he said. Still, many investors echoed one another, arguing that the incident is characteristic of relations between the Koreas.