On North Korea 20180306

My humble opinion is that North Korea is trying to replicate the strategy that China once used and succeeded: try every effort to obtain nuclear weapon first to prevent a preempted strike from US, then start the negotiation with more bargaining chips. (Still remember on the day when China’s first atom bomb succeeded, People’s Daily called for international meeting to negotiate on fully eliminate nuclear weapons) With this nuclear insurance policy in hand, Kim III can finally get what he want most: survival of his regime. This is also where all future negotiations should start. My guess would be in the short period of time (probably 6 mo ~ 2 yrs), we will see more signs of cooperative gestures from the North, even some economic reforms and market opening ups. In the long run, I simply don’t know: is Kim III satisfied with just holding up his regime in the North and pass it to his son and grandsons, or does he still dream about uniting the Korea peninsula. If the latter, we might see more turmoils in the near future.

Based on the judgement above, I say we can probably long South Korea equity market and currency. An EFT for personal investor might be iShares MSCI South Korea Index Fund (EWY), which is already up 3.52% last night. Currently it’s at 74.49, we will check back in 6 months on September 6, 2018 to see if I have got it right. If not, I shall do a follow up analysis on what I got wrong and why.

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