Asian markets and the Trump-Kim Summit

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James Cheo, senior investment strategist at Bank of Singapore

Any outcome, whether positive or negative, from the Kim-Trump Summit will not result in any material impact on regional or global markets, according to James Cheo, senior investment strategist at Bank of Singapore.

However, if the summit resulted in North Korea taking concrete steps to open its economy, South Korean companies focused on the domestic market would be the first to benefit, he said.

In a scenario where there is a “full opening” of the North’s economy, South Korean companies would benefit from greater consumption coming North Korea, and in the long run, would have lower labour costs by hiring North Koreans.

“But I think those events are very hard to predict because it depends on how much North Korea is willing to open. In the short-term, there won’t be any effect on the South Korea equity market,” he said.

The actual result of the summit is too difficult to predict. Cheo speculates that Trump may want a total opening of North Korea’s economy, while Kim may prefer a step-by-step approach.

If the summit results in the status quo – North Korea maintaining a closed economy – the impact on markets would be the same, he said.

“I think the expectations are not great for something really big. There might be little bit of pull back in South Korean equity markets, but the markets will shrug off this initial disappointment.”

Although Cheo is still in the wait-and-see mode, he believes that any outcome will have no impact on the bank’s client portfolios. “We have Korean-related securities, but these are large Korean companies that have operations all over the world and are not domestic-oriented.”

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