South Korea’s stock market nosedived Friday, responding to the geopolitical risk triggered by the two Koreas’ cross-border tensions, as well as the overnight fall on Wall Street and the recent depreciation of the yuan.

Financial authorities, however, assured that the impact of the recent North Korean attack on the financial market would be limited.

The benchmark Korea Composite Stock Price Index plummeted 38.48 points, or 2.01 percent, closing at 1,876.07 points, the lowest level since Aug. 23, 2013. The loss was largely led by the top two large-cap stocks ― Samsung Electronics and Hyundai Motor.

On the previous day, North Korea fired artillery at the South, demanding that its loudspeaker propaganda be stopped. Seoul counterattacked, warning the North of strong retaliations and issuing a top-level alert to the military.

Early Friday, the Financial Services Commission held an extraordinary meeting to check the moves of the financial market, summoning the Financial Supervisory Service, Korea Exchange and the Korea Center for International Finance, officials said.

“The recent fluctuation in the stock market is more attributable to external factors such as the global downtrend in investor sentiments,” said an official of the FSC.

The top regulator also said the impact of the North Korean artillery attacks would only last for a limited period of time.

The Ministry of Strategy and Finance shared a similar view. “North Korea’s attack should have little impact on the financial sector,” said Vice Finance Minister Joo Hyung-hwan at a macroeconomic financial policy meeting Friday.

“There was a slight rise in the credit default swap premium, but this was more due to the changes taking place in the emerging markets than the North Korean move.”

The government will nevertheless ready itself for all uncertainties, including the downside risks related to the U.S. Fed’s key interest rate hike and the Chinese currency depreciation, the vice minister added.

“After years of repeated provocations from the North, South Korea’s stock market has grown to be less sensitive to geopolitical risks,” said You Seung-min, chief investment strategist at Samsung Securities.

But market observers also expressed some level of concern as the North Korean impact came amid a bearish market and may act to further accelerate the fall.

“(The North Korean factor) may impede the investor sentiment, at least for the short term,” said Byun Joon-ho, chief investment strategist at HMC Investment Securities.

Cho Yong-jun, a researcher at Hana Daetoo, said the consequent jitteriness in the currency is more important than the provocation itself.

“Should the North Korean attack impact the currency, it may then lead to a selling spree among foreign investors,” he said.

By Bae Hyun-jung (tellme@heraldcorp.com)