By Christine Kim and Joyce Lee: 

 North Korea warned foreigners in South Korea on Tuesday to quit the country because they were at risk in the event of conflict, the latest threat of war from Pyongyang.

Soaring tensions on the peninsula have been fuelled by North Korean anger over the imposition of U.N. sanctions after its last nuclear arms test in February, creating one of the worst crises since the end of the Korean War in 1953.

"We do not wish harm on foreigners in South Korea should there be a war," said the KCNA news agency, citing its Korea Asia-Pacific Peace Committee.

Last week Pyongyang advised embassies there to consider pulling out in case of war. Earlier on Tuesday, North Korean labourers failed to turn up for work at a factory complex operated with South Korea, effectively shutting down the last major symbol of cooperation between the hostile neighbours.

Few embassies in Seoul have advised their citizens to quit. The United States, which has also been threatened by Pyongyang, has said there were no imminent signs of threats to American citizens.

Pyongyang has shown no sign of preparing its 1.2 million-strong army for war, indicating the threats could be partly intended for domestic purposes to bolster Kim jong-un, 30, the third in his family to lead the reclusive country.

South Korea's president said she was disappointed at North Korea's decision to halt operations at the Kaesong industrial park, which generates $2 billion in trade for the impoverished state.

News of the Kaesong closure diverted attention from speculation that the North was about to launch some sort of provocative act this week -- perhaps a missile launch or new nuclear test. However, residents of Seoul carried on with daily activities with no trace of anxiety.

A spokesman for textile company Taekwang Industrial and at least two other firms said North Koreans workers did not show up for work and that production had stopped.

"North Korean workers didn't come to work today, and production has halted in our Kaesong facilities," said a spokeswoman for Shinwon, a women's clothing maker.

About 475 South Korean workers and factory managers remain in Kaesong, a few km (miles) inside the border with North Korea. The South Korean government said 77 would return on Tuesday.

An executive at another South Korean apparel firm running a factory in Kaesong said late on Monday his employees had told him they would stay.

"I don't know what to do, honestly. I can't simply tell my workers to leave or stay," said the executive, who requested anonymity.

ANXIOUS WORKERS

Many South Koreans have been reluctant to leave, worried about the impact on their companies and jobs. Some bedded down in budget hotels at the South Korean border town of Paju in the hope that the zone would soon re-open.

"I have been feeling anxious now and then. Now it's really preposterous facing this," said Shing Dong-chul, 55, a South Korean worker who transports wire made in Kaesong

"North Korean workers didn't talk a lot, but they appeared to have complaints about Kaesong being closed. They worried whether they would be working or not.

North Korean workers at the park have appeared increasingly agitated in recent days, refusing to talk to their colleagues

Addressing a cabinet meeting, South Korean President Park Geun-hye described the suspension of Kaesong as "very disappointing" and said investors would now shun the North.

"Investment is all about being able to anticipate results and trust and when you have the North breaking international regulations and promises like this and suspending Kaesong while the world is watching, no country in the world will invest in the North," Park said.

More than 100 representatives from businesses operating at Kaesong held an emergency meeting at which they pleaded for the South Korean government to intervene to re-open the facility.

"Re-opening the gates to Kaesong would be the greatest step towards normalising operations," Yoo Chang-keun, a senior representative of firms in the complex, told reporters.

South Korean markets, which until recently had taken little notice of the turmoil, took a battering on Tuesday.

Stocks slipped to another four-month low, having lost nearly 4 percent since last Wednesday, when North Korea first began restricting access to Kaesong. The won currency moved little, but stood at its lowest since last July.

The North's official KCNA news agency said on Monday that the complex was being suspended as Seoul was trying to "turn the zone into a hotbed of war" against the North. It said no decision had yet been made on shutting it for good.

Few experts had expected Pyongyang to jeopardise Kaesong, which employs more than 50,000 North Koreans making household goods for 123 South Korean firms.

"They're using this as shock therapy because, regardless of what they say, if they close Kaesong the damage they will sustain will not be small," said Moon Seong-mook, a retired South Korean brigadier general who took part in previous military talks with the North.

LAST VESTIGE OF RAPPROCHEMENT

The zone is practically the last vestige of the "Sunshine Policy" of rapprochement between the two Koreas and a powerful symbol that the divided country could one day reunify.

South Korean companies are estimated to have invested around $500 million in the park since 2004.

World leaders have expressed alarm at the crisis and the prospect of a conflict involving a country claiming to be developing nuclear weapons.

China, the North's sole diplomatic and financial ally, has shown increasing impatience with Pyongyang. Russian President Vladimir Putin said hostilities could create a cataclysm worse than the 1986 Chernobyl nuclear disaster.

The North is also angry at weeks of joint U.S.-South Korean military exercises off the coast of the peninsula, with B-2 stealth bombers dispatched from their U.S. bases.

But the United States announced the postponement last weekend of a long-planned missile launch, a move officials said was aimed at easing tensions on the peninsula.

North Korean authorities told embassies in Pyongyang they could not guarantee their safety from Wednesday, after saying conflict was inevitable amid the joint U.S.-South Korean military exercises due to last until the end of the month. No diplomats appear to have left the North Korean capital.

U.S. Secretary of State John Kerry visits Seoul this week and the North holds celebrations, and possibly military demonstrations, next Monday to mark the birth date of its founder, Kim Il-Sung - the current leader's grandfather.

In Washington, U.S. Deputy Defense Secretary Ashton Carter urged China at a forum to use its influence with the North and said Moscow wanted similar action from Beijing.

"I think Russia, like others beholding this situation in North Korea, would like to see China exercise more of the influence that it evidently has with North Korea," Carter said.

But Chinese criticism of North Korea is unlikely to mean tough new action against Pyongyang because China would see any collapse of its troublesome neighbour as a disaster.

"I don't think we'll see dramatic shifts overnight and I don't think we'll see publicly 

Reuters