What may be happening on the Korean Peninsula thousands of kilometers away from Singapore believe it or not may actually affect you as an investor here. Geopolitical events have just as much drive in the markets as earnings announcements and financial related information that we digest daily. With so many of the regions market moving in sync with one another, just about any geopolitical event in the Asia Pacific region will have an affect on investors and the market.

The announcement that North Korea and South Korea will hold their second summit since the end of the Korean War more than half a century ago was welcomed by the international community which has made steady progress recently in dealing with the North Korean nuclear issue through the six party talks. The timing of the summit and visit to Pyongyang by South Korean President Roh Moo-hyun coincides with the positive developments made at the six party talks and should keep good vibes and progress on track.

But aside from all the diplomacy for a second, how does it affect investors here in Singapore?

Well it goes beyond just stating the obvious here that Singapore is in Asia. But even more deep than that, major Asian markets are located around the Korean Peninsula that have an affect on how the Singapore market trades (Tokyo, Seoul, etc.) and their major indices tend to move somewhat parallel to the STI from time to time (not an exact science but, making a general statement - it happens a lot). Couple that with the fact that a number of foreign companies from the region - mainly China, the host of the six party talks- are listed here and geopolitical events in northern Asia now take on a bit more significance to us here in Singapore.

While China isn't involved in the Inter-Korean summit, it is a major player in the six-party talks which eventually seek to have a denuclearized Korean Peninsula. Getting to that goal will require six party participants to offer assistance to the North in some way shape and form. So far we have seen energy aid in the form of heavy fuel oil. China is also the North Koreans largest trading partner, and any increase in business and trade between the two could have an impact on companies in China, especially those listed here.

So now, you can see how the dominoes can line up geopolitically speaking in terms of affecting you as an individual investor.

Curtis Bergh

Labels: Inter-Korean Summit, North Korea, Singapore Market, South Korea