South Korean financial authorities called on market players Friday not to overreact to growing jitters sparked by North Korea's latest provocation against the South.
  

North Korea fired artillery rounds at the South on Thursday, demanding a halt to loudspeaker propaganda broadcasts. South Korea responded by firing dozens of shells and warned it will deal firmly with any future provocations. Both countries have placed their militaries on high alert.
  

At a hurriedly called meeting, senior officials from the Financial Services Commission, the Financial Supervisory Service, the Korea Center for International Finance and the Korea Exchange stressed that any fallout from Thursday's attack by North Korea will be short-lived mainly because Seoul's fundamentals remain stable.
  

"There is no reason for market players to react in an excessive manner to what is unfolding at present," they said.
  

The officials pointed out that recent stock market adjustments are the result of weak global investor confidence and not related to developments taking place in South Korea.
  

"There has been net selling by foreign investors in Asian markets, but compared to other countries, there has been less shedding of South Korean shares," officials emphasized.
  

While geo-political risks associated with North Korea only posed limited challenges, uncertainties surrounding China's economy and its stock market crash, as well as the likelihood of the United States marking up its key interest rates, were longer term concerns, they added.  
  

Despite the call, South Korean shares fell nearly 2 percent in early trade on Friday, while the country's risk premium hit a seven month high, market data showed.
  

According to market tracker Markit, the country's credit default swap remium for the country's foreign exchange stabilization bonds with five year maturity stood at 66.98 basis points, up 3.04 basis points from the day before and the highest since 67.63 basis points tallied for Jan. 20. A basis point is 0.01 percentage point.
  

CDS reflects the cost of hedging credit risk on corporate and sovereign debt with a rise implying a deterioration in the credit of government bonds and higher cost of insurance.
  

In a separate meeting in Seoul, a vice finance minister said the market need not be overly worried about the latest standoff.
  

"North Korea's attack, judging by past experience, should have little impact on the country's financial sector," Joo Hyung-hwan said. "The government is ready to respond proactively to all uncertainties."
  

The financial officials said that while there was a strengthening of the U.S. dollar compared with the Korean won in the offshore non-deliverable forwards market, this soon stabilized.
 
   
The Bank of Korea, which also called a separate meeting on the incident, said the effect on the market was largely limited, citing market indicators such as non-deliverable forward exchange rate and credit default swap premium.
  

The central bank said it will continue to monitor the market situation and step up communication with market participants in efforts to rein in volatility.
  

Related government ministries have set up an around-the-clock monitoring system to check developments in the financial and futures markets and deal with any concerns. (Yonhap)