LONDON/NEW YORK (Reuters) ― North Korea’s shelling of an island belonging to its southern neighbor on Tuesday hasn’t spread alarm among foreign investors who say they have seen this kind of tension before.

Mutual funds hold shares in South Korean blue chip companies such as Samsung Electronics and Hyundai Motor and the escalation of tensions prompted fears investors would rush for the exits. For details, see

“Unless there is significant escalation from here on inwards, I don’t think this is something that is going to have a major sustained impact on the markets,” said Brian Coulton, global emerging markets strategist at British investment manager Legal & General Investments.

Stock and foreign exchange quotation boards at Korea Exchange Bank display the benchmark KOSPI slightly down to 1925.98 and the won strengthening to close at 1,142.3 won Wednesday in the wake of North Korea’s shelling of a South Korean island the previous day. (Yonhap News) 

While shares fell, investors put the artillery attacks in context of North Korea’s history of isolated conflicts. What’s more, the United States wasn’t considering immediate deterrent action, and investors noted that the provocation fits into a pattern designed to draw attention rather than war.

Some analysts believe the move is meant to give North Korean leader Kim Jong-Il’s son and heir apparent greater standing with the military.

“Investors know it’s basically sabre-rattling,” said Keith Springer, president of Springer Financial Advisors in Sacramento, California. “They needed a military victory to make his son a hero. That’s what the nation thrives on.”

There was enough alarm for investors to pressure South Korean shares across time zones. The iShares MSCI South Korea exchange-traded fund dropped nearly 6 percent in the United States to the lowest level in more than a month.

Jeffrey Sica, president of Morristown, New Jersey-based SICA Wealth Management, was preparing clients for a resurgence in commodities prices that might come as a result of instability in the region.

China will likely be wary of raising its interest rates if this crisis unfolds further, leaving the yuan artificially low and growth unchecked, he said.

Still, many investors echoed one another, arguing that the incident is characteristic of relations between the Koreas.

“There are periodically these sorts of hiccups in relations. This is more severe than the norm perhaps, but we’re not unduly worried about it,” said Allan Conway, head of global emerging markets at British investment manager Schroders. “Korea remains an attractive market and we are overweight in Korea. If you are investing in Korea you’ve got to live with the fact there is always potential for incidents to occur between the two sides. It goes with the territory.”