From overheating to overeating. Until the sinking of one of its warships at the end of March, Seoul had been fussing over inflationary forces unleashed by a spirited economic rebound. Now graver matters are taking over. On Monday evening, the South's first propaganda broadcast into North Korea in six years reminded listeners that citizens tend to be richer, and bellies fuller, south of the border.

This is an alarming escalation. In the five days since South Korean foreign minister Yu Myung-hwan said it was “obvious” the North was behind the deadly torpedo attack, the won has fallen 7 per cent against the dollar – a much steeper fall than after last April's missile test, or May's second nuclear detonation. Not a single Asian equity index was up yesterday, when reports suggested Kim Jong-il, the North Korean dictator, had ordered troops to prepare for combat.

In general, though, economic sanctions against the North, imposed in co-ordination with key allies, need not force out long-term investors in the South. Credit default swaps on South Korean government debt have become about a third more expensive during the past five days – but sovereign blow-outs are par for the course these days. The stock market's 14 per cent fall during that period is only fractionally worse than stable, peaceful Norway's. Even with net selling of equities in May, more foreign institutional investment has flowed in to South Korea this year than into Indian, Indonesian and Filipino stocks put together. A weaker won after all – especially versus the Japanese yen – should support exporters such as Samsung Electronics and Hyundai Motor. It is encouraging that Seoul intends to exempt from the trade ban the industrial complex at Kaesong, which generates just over half of annual inter-Korean trade (although North Korea says workers from the South will be expelled from the park). Investors, for now at least, should not be on a war footing.