* N.Korea nuclear test dents KOSPI and won; reaction
limited
* Nikkei gains 1.3 pct, gold little changed
* Shanghai shares edge up on PetroChina
* U.S. and UK holidays limit trading
(Repeats to additional subscribers with no change to text)
By Eric Burroughs
HONG KONG, May 25 (Reuters) - South Korean stocks and the
won dipped after North Korea said it had conducted a nuclear
test on Monday, but the reaction was limited as investors had
expected such a move from the North and have become long
accustomed its provocations.
An initial tumble in South Korean shares and pull-back in
higher-yielding currencies proved short-lived as market players
believed North Korea's action was another political gambit
aimed at securing concessions from major global powers.
North Korea's nuclear test, along with reports that it also
fired a short-range missile, was set to isolate the reclusive
nation even further. Japan requested a United Nations Security
Council meeting later in the day. []
Seoul's KOSPI index <> slipped 0.3 percent but had
slid more than 6 percent at one point in the knee-jerk
reaction.
The cross-market reaction was limited, especially since
North Korea had warned about conducting such a test for weeks.
Safe-haven gold was little changed and government bond prices
fell slightly, while Japan's Nikkei average <> climbed 1.3
percent.
"This is another setback, but it is not something we feel
will have a lasting impact on the market," said David Mann, FX
strategist and head of Korea research at Standard Chartered in
Hong Kong.
The MSCI index of Asia-Pacific shares outside Japan
<.MIAPJ0000PUS> shed 0.4 percent, pulling further away from a
seven-month high struck last week.
Technology shares, which have helped power this year's
rally, led losses. Samsung Electronics <005930.KS> was the
biggest drag on the KOSPI, falling 1.5 percent.
Traders in Seoul said foreign investors took advantage of
the KOSPI's sharp drop to shift more funds into the market,
which has been one of the world's best performing equity
indexes this year with a rise of more than 24 percent.
"We believe the falls will be relatively short-lived,
though the market's precise direction will depend largely on
how political circles respond to the test," said Kwak Joong-bo,
a market analyst at Hana Daetoo Securities in Seoul.
Asia has been a favourite destination for investors betting
the region will be on the front edge of any global economic
recovery.
In the week ending last Wednesday, investors poured $933
million of funds into Asian equity markets excluding Japan, the
biggest intake among major emerging market fund groups followed
by fund tracker EPFR Global.
Shares in China recovered from an initial drop after the
government's announcement that it would allow companies to
resume listing shares, which stoked worries that a flood of
stock supply could hit the rallying market.
The Shanghai Composite index <> edged up 0.1 percent,
getting a lift from shares of PetroChina, Asia's largest oil
and gas producer.
PetroChina <601857.SS> rose 2.3 percent said it acquiring a
45.5 percent stake in Singapore Petroleum Company for $1
billion and planned to make a general offer to buy the rest of
the firm. []
The resumption of IPO listings in China was taken as a sign
that authorities saw the Shanghai Composite's more than 40
percent surge this year as being solid enough to withstand any
spate of equity offerings. []
Market activity was limited, with U.S. and British
financial markets closed later in the day for holidays.
WON AND BONDS RETREAT
The dollar pushed up 0.3 percent to 95.05 yen <JPY=>,
edging away from a two-month low hit on Friday.
The yen gave up initial gains and fell as market players
who were betting that the North Korea test would spark a bigger
drop in higher-yielding currencies covered positions.
The Australian dollar shed 0.2 percent to $0.7810 <AUD=D4>
but recovered from a session low of $0.7774 hit on the nuclear
test news.
The South Korean won, the hardest hit of Asian currencies
during the financial crisis, also bounced back to lose just 0.1
percent at 1,248.5 to the dollar <KRW=> after having slid as
far as 1,268.9.
The resilience of stock markets put more pressure on
government bonds, already straining from a sell-off in U.S.
Treasuries on worries the U.S. government could lose its top
triple-A credit rating and be forced to offer higher yields to
foreign investors.
June Japanese government bond futures <2JGBv1> lost 0.16
point. The 10-year JGB yield <JP10YTN=JBTC> edged up 1.5 basis
points to 1.445 percent.
The optimism reflected in stock markets has contrasted with
the cautious tone of some central bankers.
Bank of Japan Governor Masaaki Shirakawa said on Monday
that any recovery in the world economy will be a mild one
because it will take a considerable time to get rid of the
excesses built up during the boom years. []
(Additional reporting by Kevin Plumberg in Hong Kong and
Jungyoun Park in Seoul)
(Editing by Kazunori Takada)
