[Writer's Choice] Stocks in South Korea & Japan Soar in Reaction to North Korea-US Talks

Jay Yim, March 15, 2019, 5:23 p.m.

On Friday, stocks related to defense in South Korea and Japan rose by more than 20 percent in reaction to reports that North Korea threatened to suspend nuclear talks with the United States.

At the same time, shares of South Korean firms with exposure to North Korea fell significantly.

Choe Son Hui, who is North Korea's Vice Foreign Minister, said at a news conference that the North has "no intention to yield" to any demands made by the U.S. She added that Kim Jong Un is possibly rethinking a moratorium (a temporary prohibition of an activity) on missile launches and will make an official announcement soon on where he stands in regards to talks with the United States.

Kim met with President Trump last month in Hanoi, but the two-day summit was cut short after both leaders could not reach an agreement on the denuclearization of North Korea and lifting economic sanctions on Pyongyang.

The stocks of several Asia-listed defense companies soared almost immediately after Choe's comments were reported on Friday.

In South Korea, the stocks of Victek and Hanil Forging Industrial rose 24.07 percent and 20.62 percent, respectively, by the end of Friday. In Japan, Ishikawa Seisakusho's shares rose to 25.64 percent.

On the other hand, South Korean shares which were exposed to North Korea plummeted downward. Hanil Hyundai Cement, by the end of Friday, dropped by 8.77 percent, and Hyundai Elevator declined by 6.9 percent.

Some of the broader markets in South Korea and Japan rose slightly. Kospi increased by 0.95 percent and Japan's Nikkei 225 index increased by 0.77 percent. Furthermore, the Korean won dropped in value, when compared to the U.S. dollar, by around 0.1 percent, while the Japanese yen (seen typically as a safe haven) traded flat.

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