ASIAN stocks sank yesterday as the death of North Korean leader Kim Jong Il added to the uncertainties dogging financial markets.

    South Korea’s Kospi index dived 4.1 percent but later recouped some losses to trade 3.4 percent lower at 1,777.64 by early afternoon. The Korean won fell 1.6 percent against the U.S. dollar, a traditional haven in times of uncertainty. The Japanese yen and euro also weakened against the dollar.

    Japan’s Nikkei 225 index was down 1.1 percent at 8,308.42, Hong Kong’s Hang Seng slid 2.2 percent to 17,890.13 and the Shanghai Composite Index fell 1.6 percent to 2,188.39.

    Kim Jong Il’s death raises the possibility of increased instability on the divided Korean Peninsula.

    “We’re seeing deeper negative sentiment in some markets,” said Dariusz Kowalczyk, strategist at Credit Agricole CIB. “Basically this is because risk aversion on the geopolitical front has increased given that there’s a transition of power in a relatively unstable country.”

    Fitch Ratings, which spooked markets across the globe with a warning Friday it may downgrade ratings of a half-dozen European countries, said it did not view Kim’s death “as a trigger for negative action on South Korea’s sovereign ratings in itself.”

    “For now, it’s much too early to say risks have materially increased, but clearly we will keep the situation under close review,” said Andrew Colquhoun, head of Fitch’s Asia-Pacific sovereigns. But the news also sent markets in Taiwan, Singapore, Australia, New Zealand and Indonesia sinking.

    “Particularly with the bearish market sentiment now, any negative news will make the market much more gloomy,” said Kwong Man Bun, chief operating officer at KGI Securities in Hong Kong.

    Analysts said the impact of Kim’s death on markets is likely to be passing. “In the short term there will be some psychological uncertainty but I think things will go back to the fundamentals,” said Steven Leung, director of institutional sales at UOB-Kay Hian Ltd. in Hong Kong.

    (SD-Agencies)