SEOUL: Seoul shares extended their fall to nearly 5 percent on Monday after North Korea's state television reported that North Korean leader Kim Jong-il had died on Saturday.
Seoul's equity market is likely to remain under downward pressure in the near term as the news comes at a time when financial markets are already in fragile shape.
Analysts said uncertainty now over leadership succession in North Korea was the key concern.
"The key focus will be how the succession proceeds. Kim Jong-il had been in his late-30s when his father died, but Kim Jong-un is still pretty young, in his early-20's," said Bae Sung-young, a market analyst at Hyundai Securities.
"It is hard to predict how things in North Korea will develop from here this time. And this is a risk factor, an uncertainty that financial market participants do not like. For now, we are keeping eyes on foreign investor reaction and developments in North Korea," Bae added.
The Korea Composite Stock Price Index (KOSPI) was down 4 percent at 1,765.93 points as of 0357 GMT, trimming falls of as much as 4.9 percent earlier in the session.
Key large-cap shares led falls, with LG Electronics , the world' No.3 handset maker, down 4 percent and LG Display, the world's No.2 flat panel maker, down 7 percent.
But defence stocks and food makers jumped.
Shares in military equipment makers Victek and Huneed Technology both rallied by their daily limit of 15 percent.
Instant noodle makers Nong Shim jumped 9.7 percent and Sam Yang Foods leapt 12 percent amid expectations these companies would benefit if there was a rush to hoard food staples to prepare for potential emergency events.
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