Markets Slide on News of Kim Jong IL's Death
By: Stephanie Castillo
Updated: December 19, 2011
Markets hate
uncertainty and the death of North Korean dictator Kim Jong IL certainly
falls under that category.
On Monday morning,
South Korean stocks lost more than 4% of its value Monday morning and
the South Korean won dropped more than 1% against the dollar. The
Japanese yen fell slightly against the dollar, as did the euro
and the Australian dollar.
One might have
expected an even bigger market reaction. But much of the peril North
Korea presents to the South's economic engine is priced in to how
investors rate companies in South Korea, the idea being that an
unexpected conflagration or destabilization makes South Korea riskier
than stocks in other countries. South Korean stocks, for instance, trade
at among the lowest price-to-book ratios in all of Asia. The
explanation is often the North Korean factor.
South Korean markets
are used to uncertainty emanating from their northern neighbors, as
military skirmishes, missile launches and nuclear bomb tests occur with
uncomfortable regularity. Investors often treat the market
swoons that follow as buying opportunities.
The death of the
dictator however, presents a new level of unknowns politically,
economically and militarily for the region and the world. Bordering
China and Russia and short missile ride to Japan, nuclear-armed North
Korea sits at the nexus of global interests. Unrest or disintegration of
the regime would have large impacts on its neighbors, especially South
Korea.
(Copyright: Wall Street Journal) Read more
(Copyright: Wall Street Journal) Read more
