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Why North Korean missiles aren’t scaring off investors
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Loading...Who’s afraid of North Korea? Not investors, apparently.
The politically isolated Asian country conducted its ninth missile launch of 2017 on Monday, with the projectile landing within 200 miles of Japan’s coastline.
South Korea’s benchmark stock index marched to fresh records Monday morning. It climbed as much as 0.7% before profit-taking kicked in and the index closed down 0.1%.
North Korea’s prior two Sunday missile tests were followed by gains on the Kospi of 0.7% and 0.2%, respectively, on the following Mondays. For its part, Japan’s Nikkei Stock Average closed flat following a 0.5% gain last Monday.
The threat of war with the U.S. hasn’t shaken investors, either. After President Donald Trump left open the possibility of military action against North Korea in an interview aired April 30, the Kospi rose a combined 4% in the following three trading sessions.
Overall, it has gained 13% since Feb. 12, when North Korea launched its first ballistic missile of 2017. Even after that firing, the Kospi rose 0.2% the next trading day.
Meanwhile, the Japanese yen—which has historically sold off following instances of North Korean aggression, belying the currency’s status as a haven—has been holding up.
Why is it so?
So long as future launches go off without incident, investors are liable to treat them like background noise, analysts said, and focus on other issues they believe are more pertinent to current asset prices.
On other side China’s support of Kim Jong Un’s regime remains a key obstacle. And investors know that.
“It’s very hard for any country to go against North Korea if you’re not sure how China will respond,” said Mr. Horchani. But he added that unless action is taken against Pyongyang, the market expects it will continue its missile testing.
Source: Wall street Journal
Jr Trader Petar Milanov
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