HONG KONG (AFP) - South Korean stocks and the won tumbled on Friday (Sept 9) following another suspected nuclear test by the North, while most other regional markets were also dragged down by worries over global central policy easing.
A South Korean defence ministry spokesman said that "based on our analysis, we believe that the North conducted a nuclear test today".
The news intensified worries about geopolitical tensions in the region as world powers including China struggle to rein in Pyongyang's erratic behaviour.
In early trade, Seoul's KOSPI was down 1.3 per cent while a Bank of Korea decision not to cut interest rates was unable to prevent the won sinking 0.8 per cent.
The losses led a sell-off around most of the region as investors considered central bank inaction in dealing with a slowdown in the global economy.
On Thursday, the European Central Bank opted against fresh stimulus, with its boss Mario Draghi calling for "patience" to see the effect of vast amounts of cash already injected into the system.
While he had not been expected to announce any action, there was disappointment Draghi did not provide any forward guidance, while some analysts said the Bank was possibly planning new measures as its bond-buying programme runs out of assets to buy.
Tokyo-based dealers are also concerned at the lack of movement from Japan's central bank ahead of a policy meeting later this month, despite another weak growth reading Thursday and a general malaise across the economy.
"The ECB, and many central banks now, look to be taking more of a measured approach to additional policy easing compared with the not-too-distant past," Philip Borkin, a senior economist in Auckland at ANZ Bank New Zealand, said in a client note.
"This is only natural, of course, as monetary policy delves further into the unknown."
Japan's Nikkei ended the morning down 0.2 per cent, while Sydney and Singapore each shed 0.7 per cent. Taipei shed 1.1 per cent and there were also sharp losses in Wellington, Manila and Jakarta.
However, Hong Kong climbed 0.4 per cent to break above the 24,000 market for the first time since August last year following a better-than-expected Chinese trade report. Shanghai was flat.
On currency markets, the euro rose to US$1.1271 from US$1.1261 in New York following the ECB's decision not to ease policy, while traders also welcomed its slight improvement on economic growth this year.
Oil prices retreated after surging on Thursday on the back of data showing a sharp fall in US stockpiles.
West Texas Intermediate eased 41 cents to US$47.21 while Brent slipped 46 cents to US$49.53. The two contracts each rose more than US$2 on Thursday.
The US Department of Energy said inventories slumped by 14.5 million barrels last week, the biggest fall for 17 years.
However, the decline was attributed to the suspension of imports and shutdown of some production due to Hurricane Hermine, which passed through the Gulf of Mexico in late August, and there were warnings of a rebound next week.