North Korea has carried out an underground nuclear test, the Korean Central News Agency (KCNA) said. The dollar rose to a seven-month high against the yen after the reports. The South Korean won tumbled more than one per cent against the dollar, while South Korea's main stock index was down nearly three per cent.

Joseph Cheng, foreign policy expert at City University of Hong Kong:
"I think China will be hard pressed to handle the situation, and certainly the six-party talks have proven to be unsuccessful.

"This may really force China and South Korea to really put pressure on Pyongyang.

"Obviously, this kind of engagement policy doesn't work and these countries are now under pressure from the United States to persuade Pyongyang to come to the table.

"The test escalates tensions on the Korean peninsula. It certainly will not lead to war immediately.

"Pyongyang's assessment is that the United States is bogged down in Iraq, and then you have the Iran problem... Having gone this far, it becomes more and more difficult to persuade North Korea to give up its nuclear capability."

Park Yong-Il, senior dealer at DBS Bank Ltd in Seoul:
"The news is expected to impact on foreign investors in the US and Europe tonight, although offshore market players seem unable to make a decision right now. If the UN imposes sanctions on North Korea, investors may pull out some of the money which they have invested in South Korea."

Kim Hyun-Tae, a fund manager at Landmark Investment Management in Seoul:
"Looking back at history, this kind of North Korea issue always ends up as a good chance to buy shares at a cheaper price. We are in a scenario in which a war is not likely to happen. It's mainly political posturing."

Kim Seong-Ki, chief investment officer at Sh Asset Management in Seoul:
"A nuclear test by North Korea would certainly have a big impact, and that's something that people are worried about. The dilemma, of course, is: when is it time to buy? I can't really tell you because the outcome of this issue is so out of our control."

Wang Qing, Economist at Bank of America in Hong Kong:
"The nuclear test's impact is already there, the yen and won have weakened after the news, but I believe the impact will be short-lived. The economy of North Korea is virtually closed from the rest of the world and its regional impact won't be very significant unless there was a major military confrontation.

"The United Nations has warned North Korea about the consequences of its nuclear test and China's position on the issue is very clear. We need to see whether there will be international sanctions."

Andrew To, sales director, Tai Fook Securities, Hong Kong:
"The news hasn't been confirmed, but there are a lot of uncertainties. There's plenty of profits to be taken with global markets near multi-year or record highs, so the market is sensitive to negative news. "Will the global market pull back? We'll have to wait until the European markets open to see just how bad it is. If markets drop below their 50-day moving average, it would be a bad sign."

Rob Subbaraman, senior economist, Lehman Brothers, Hong Kong:
"It's too early to say what impact this will have. It looks like it is affecting equity markets.

"One day is not enough to influence economies in the region but, depending on what happens in coming weeks, if geo-political risk remains elevated as it is today, and markets are under pressure, economies could be hurt through a negative wealth effect and through a slump in business and consumer confidence. South Korea is most exposed but potentially there could be a ripple effect in other economies in the region."

Shen Jiru, researcher at The Chinese Academy of Social Sciences, Beijing:
"It is expected, since they announced they would do it last week. It deals another severe blow to the current international nuclear non-proliferation regime. I personally feel it is very regrettable. The situation in Northeast Asia has become extremely complicated." He declined to predict how China would officially react to the news.

Takahira Ogawa, director of Sovereign Ratings For Asia Pacific, Standard & Poor's:
"At this stage, we see no significant direct implication from the news. It all depends on the future reaction of the international community and the capital markets.

"North Korea places the utmost importance in the maintenance of the regime. North Korea must calculate to what extent to conduct this kind of brinkmanship. As for the United States, it is very difficult for them to use armed conflict to resolve the issue.

"Therefore, other than a short-term reaction from the markets, we expect the medium- and long-term market response to be relatively subdued."

Tim Condon, head of Asian Research At Ing in Singapore:
"This looks like it will be a real test of the lesson that all Asian political risk is a buying opportunity. That's been the lesson from all of the political turmoil in the Philippines, in Thailand - investors have looked at these as a buying opportunity, and this will test that theory. I suspect that at this point things could get pretty sticky in the sense that we could see Japan and Korea and Taiwan go nuclear, and so the risk premium for the entire region could be higher as a result of this.

"I think it's hard to predict, but for right now I think investors will stay on the sidelines and wait to see where this is going."