North Korea's largest nuclear missile test to date caused Asian stocks to plummet, while investors fled to safe haven assets in the face of growing tensions between the country and the US.
For neighbouring South Korea - popular choice among Asia Pacific investors - the tumult has caused serious alarm and fund managers are cautious over how to proceed with the threat of conflict looming.
Ben Surtees, who has a 15% allocation to South Korea in the Jupiter Asian fund, told Citywire Selector he will not reduce holdings as he did not believe North Korea's leader, Kim Jong-Un, was trying to start a nuclear war.
'The provocations that we have seen over the last few weeks are carefully planned. The ultimate goal is to end his own regime - I can't see the logic or rationale for that.
'To me it is more a heightened episode where he is trying to encourage better bargaining power with the US and or China, as well as further improving the status within his own country and citizens.
‘It may just be a clever - albeit dangerous - attempt at improving the bargaining power of his regime in an environment where you have a relatively new untried US President. He now has nuclear capability and technology that is obviously more advanced that most people had previously believed,’ he said.
Surtees added that the South Korean index had performed well this year and the currency had remained strong despite internal political upheaval.
'We've seen foreign inflows unabated until fairly recently so it has been one of the better performing markets in the region,' he said.
'Historically investors ignored the noise, it feels less like that kind of event to me. South Korea has always traded at a discount to the rest of the region in part because of poor governance ignoring dividend culture rather than what is over the border in North Korea.'
Meanwhile, Ed Wiltshire, who manages the Aviva Investors Asian Equity Income fund with Xiaoyu Liu, said South Korea has been living with the threat for a number of years but other markets could now be affected.
'If the situation does escalate beyond words and sanctions into military action, clearly the South Korean market will take a big hit. But it is difficult to see any such scenario that doesn’t impact all markets in the region or involve the US and China.
‘The involvement of the US and China may ensure that the stakes are too high for any move away from the status quo,’ Wiltshire told Citywire Selector.
At a granular level, Wiltshire added that measures to make companies more transparent had been well received and South Korea was still popular with many investors.
'The recent five-year imprisonment of the chief of Samsung, South Korea’s largest company, for bribery has only served to underline this.
'If investors can accept the geopolitical risks, South Korea remains one of the most undervalued and potentially attractive equity markets in the Asian region.'