Eli Lee, Bank of Singapore
Head of investment strategy
We anticipate a near-term easing of market risk sentiment, and an overall relief rally as the trend of nuclear escalation between the two countries fades in the meantime.
The South Korean and Japanese markets are most sensitive to North Korean risk and would benefit most from a successful summit.
In the long run, however, the market will discern if there are deeper economic implications, particularly for South Korea, aside from a general uplift in business confidence and investor sentiment.
Far right-tail outcomes, such as the opening up of North Korea or the Korean reunification, will also be reassessed.
Importantly, the root cause of long-term nuclear tension is, of course, the existence of North Korea’s nuclear program.
While dialogue and friendly relations are positive developments, the real impact of the summit will be measured by any progress made towards the difficult and complex goal of CVID: the “complete, verifiable and irreversible denuclearization” of the Korean peninsula.
No one who has bet on Korean denuclearization has ever won.