S. Korea bourse hits Deutsche Bank with big fine (AFP)

SEOUL (AFP) – South Korea's stock market announced Friday it would fine Deutsche Bank's local brokerage almost $886,000 for improper transactions, the biggest penalty it has ever imposed.

The move comes after the some of the brokerage's functions were suspended for six months by financial authorities for market manipulation while prosecutors said they were also looking into the case.

The Korea Exchange on Friday ordered the German bank to pay the one billion won fine and urged it to discipline three employees.

It said the unit had engaged in improper arbitrage trading between the futures and spot markets and sold an excessive amount of shares in SK Telecom and KT Corp.

The exchange said the brokerage provided misleading information about the nature of its arbitrage transactions and violated rules on large programme selling orders, which should be reported in advance.

The German bank's Hong Kong unit and local securities unit came under investigation for alleged market manipulation and unfair transactions following a plunge in the South Korean market on November 1, an options expiry day.

The benchmark KOSPI index fell 48 points in the last 10 minutes of trading due to arbitrage trading between the spot and futures markets.

During that time about 2.4 trillion won in sell orders from foreign investors were processed, most of them through Deutsche Bank's local unit.

The Financial Services Commission decided Wednesday to stop the local brokerage from trading in proprietary securities and exchange-listed derivatives for six months from April 1.

State prosecutors said Thursday they had launched a probe into the bank's local unit and were analysing data presented by the Financial Services Commission to enable it to summon bank employees.

Five members of the bank's staff are suspected of gaining 44.8 billion won through illegal trading.

Deutsche Bank expressed regret but said the move would disrupt "only a small fraction of its business" in South Korea.

Seoul, in common with other developing markets, has grown increasingly concerned at potential risks posed by rapid foreign capital flows.

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China openly backs North Korea succession plan: KCNA (Reuters)

SEOUL (Reuters) – A top Chinese official has backed ailing North Korean leader Kim Jong-il's plans to hand power to his son, the North's state media said on Tuesday, hailing the "successful solution" to allow continued socialist rule.

Meng Jianzhu, China's public security minister, congratulated Kim's youngest son Jong-un on his appointment as vice-chairman of the Central Military Commission last year, "hailing the successful solution of the issue of succession to the Korean revolution," KCNA news agency reported.

Experts said the term "succession" did not refer directly to family rule, but was a commonly used expression referring to a continuation of the North's current political system.

"(But) we can interpret that as a sign of acceptance on the part of China's political and power elite with regards to North Korea's succession," said Park Young-ho, of the Korea Institute for National Unification in Seoul.

Meng gave gifts to both Kim Jong-il, who celebrates his 69th birthday on Wednesday, and his son, KCNA reported.

Kim Jong-un was last year named as a four-star general and given high ranking political positions, signaling the start of the third-generation power transition in the secretive state.

Until the younger Kim's appointments, state media had never even reported the existence of Kim's children. Little is known about Jong-un other than that he is in his late twenties, and was educated in Switzerland.

China is the North's main ally and benefactor, and has stood by Pyongyang despite international criticism over the North's revelations last year of big advances in its nuclear programme, as well as two deadly attacks on the peninsula.

China provides more than 80 percent of the North's food and oil and has invested heavily in the isolated state in recent year, when Pyongyang has been under international sanctions for nuclear and missile tests.

The North's reclusive leader, suspected of having suffered a stroke in 2008, visited China twice last year, trips analysts and officials say were mainly aimed at winning Beijing's support for his hereditary succession process.

Beijing has nudged Pyongyang to change its ways and follow China's path of economic reform, but its paramount concern is stability and it sees a continuation of family rule as the best guarantee of this.

China worries that any regime change in the North could cause a flood of refugees to cross its border, precipitate reunification of the peninsula on the South's terms and bring American influence right up to its border.

Kim Jong-un was appointed in September as vice chairman of the Central Military Commission of the ruling Workers' Party, which oversees the North's 1.2 million-strong military headed by his father.

Meng is in the North Korean capital on the first leg of a tour that will also take him to Laos, Singapore and Malaysia.

(Reporting by Jeremy Laurence; Editing by Jonathan Hopfner and Daniel Magnowski)

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Korea talks stall after North delegation walks out

The two sides fail to reach an agreement on securing high-level military talksThe talks were the first of its kind since the Yeonpyeong island bombingThe bombing killed four South Koreans last November
Seoul (CNN) -- Talks between North and South Korea collapsed Wednesday after the two sides failed to reach an agreement on securing high-level military discussions during preparatory meetings held in the border area of Panmunjom.
The resumption of talks, the first of its kind since the Yeonpyeong island bombing that killed four South Koreans last November, signaled a change in atmosphere between the two Koreas. It led many to speculate that a consensus on holding higher-level military would be reached.
However, the North Korean delegation walked away from the negotiating table less than five hours after the second round of talks had begun, a move that was called "unilateral" by the South Korean Defense Ministry.
One of the issues that stalled talks was North Korea's demand for a comprehensive agenda from both sides on possible military actions, while the South pushed to limit the talks to the sinking of the Cheonan warship and Yeonpyeong Island attack, the South Korean Defense Ministry said.
The South and North ran into a similar deadlock while discussing the agenda of the high-level talks on the first day Tuesday. Seoul has demanded that North Korea apologizes for its military provocations carried out last year that also include the sinking of a warship that killed 46 sailors in March.
Pyongyang has denied involvement in the case.
South Korea emphasized Tuesday that it wants the agenda of the high-level talks to specify the island bombing and warship attack. The North argued back, saying that restricting the talks to those issues is "the equivalent of refusing to hold higher-level military talks," according to Seoul's Defense Ministry.
The resumption of humanitarian talks may also be in jeopardy because of the collapse in military talks.
Seoul earlier in the day sent a message to the North saying that it agreed in principal to hold humanitarian talks, in response to two requests Pyongyang had made this year, according to the Unification Ministry.
The South said it would be willing to discuss the details of the time and venue of the humanitarian talks after the high-level military talks are over. The Unification Ministry has not yet indicated whether the collapse of the military talks will push back or affect the resumption of the so-called Red Cross talks.
The Red Cross talks are used to facilitate reunions for families separated by the Korean War and for the North to receive humanitarian aid such as rice and fertilizer from Seoul.
CNN's Paula Hancocks and Jiyeon Lee contributed to this report.
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