Kim has limited market impact
Mist clouds the view of the Kaesong Industrial Complex, the symbol of inter-Korean economic cooperation, from the Dora observatory in Paju, Gyeonggi yesterday. News reports about North Korean leader Kim Jong-il’s health problems are clouding the outlook for inter-Korean business. [YONHAP]
A day after news that Kim may have suffered a stroke, the benchmark Kospi edged up 10.48 points, or 0.7 percent, to end at 1,464.98 yesterday. Shares of Hyundai Merchant and Hyundai Corp., affiliates of unlisted Hyundai Asan, advanced 1.2 percent and 2.2 percent, respectively, defying expectations that they would close down. Hyundai Asan has an exclusive business partnership with the North Korean government.
Contrary to widespread ideas to the contrary, the political situation in the North has a limited economic impact in the South. When Jong-il’s father and former North Korean head Kim Il Sung died in 1994, the main Kospi retreated only 4 percent in a one-month period and rebounded afterwards. The Korean won declined for about a week and then stabilized.
Kim Sung-joo, head of the investment strategy team at Daewoo Securities, said, “Even if the news of Kim’s illness is confirmed, it does not seem likely that it will deal a significant blow to the financial market.”
However, experts agreed that the present situation is worse than when Kim Il Sung died in that there is no clear picture of who will take power. “Uncertainty is higher now than before, when it was obvious who would step into the former leader’s shoes,” said Lee Jong-woo, head of the research center at HMC Investment and Securities.
The fact that he is in absolute control of disabling the Yongbyon nuclear reactor could call the disarmament plan into question, another negative point.
Economists were mostly cautious about predicting how economic conditions in South Korea will unfold should rumors of Kim’s health problems prove to be true or if he died.
“Although we might need further information for deeper analysis, an assessment of South Korean future economic circumstances including the possible downgrading or upgrading of sovereign credit ratings will vary hugely, depending on a range of scenarios that we may not know of,” said Kwon Soon-woo, a senior researcher at Samsung Economic Research Institute. “But it is true that yet another risk factor has emerged, given that the volatility in the global financial market has already heightened and the real economy is aggravated.”
By Seo Ji-eun Staff Reporter [spring@joongang.co.kr]
with the Korea JoongAng Daily
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