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Given overnight movement in the currency markets, South Korean ADRs could open down 3% to 6% this morning after a sudden skirmish with North Korea killed two people.

Samsung Electronics, a leader of the Seoul market that does not trade in the United States, is trending 4% lower this morning in Germany on a currency-adjusted basis. At one point, it and other Korean stocks was trading limit down in overnight trading.

The Korean won is also sinking, giving up 1% of its value on fears that the North Korean government is losing control of its military as dictator Kim Jong-Il’s health declines — or worse, that the shelling of an island between the two countries is a deliberate provocation.

The attack, which killed two, is currently considered one of the worst outbreaks on the peninsula since the end of the Korean War in 1955.

Traditionally, the ADRs overreact to this kind of news, so any movement beyond a 6% decline is probably a buying trigger. This has happened over and over in Korean history, most notably in 2003 when North Korea pulled out of the non-proliferation treaty and started on its course of constructing nuclear weapons.

Watch EWY for another indicator of where the broad Korean market will go from here.

Disclosure: No positions

Source: Will Korean Hostilities Hit the Market?