South Korean stocks slumped 3.97 per cent on Monday after the North said it had tested a nuclear weapon.
The KOSPI fell 55.78 points to 1,347.97 soon after Pyongyang's announcement that it had "successfully" carried out an underground test that was more powerful than its previous test in October 2006.
The North "successfully conducted one more underground nuclear test on May 25 as part of the measures to bolster up its nuclear deterrent for self-defence in every way as requested by its scientists and technicians," the Korean Central News Agency said.
The North had threatened a second test in protest at the UN Security Council's decision to censure its April 5 long-range rocket launch.
It announced it was quitting six-nation nuclear disarmament talks and would restart its plutonium-making programme. The US Geological Survey said it detected what it called a 4.7-magnitude earthquake in North Korea on Monday.
The tremor struck at 9:54 am (0054 GMT), 375 kilometres (230 miles) northeast of Pyongyang at a depth of just 10 kilometres, it said.