It is a known fact that market hates uncertainty and we will study this aspect by considering the demise of North Korean dictator Kim Jong Il.
The uncertainty and nervousness in Asian markets occurred because of the demise of the leader. The rationale because of this unease is not really difficult to ascertain; North Korea is usually a desperately poor country that has a huge military. In the event the new leader, Kim Jong Un cannot quickly cement his power and authority, there is certainly the threat and likelihood of civil war, military provocation against South Korea and/or Japan, as well as a continuation (or escalation) of a typical brinksmanship that Kim Jong Il made use to keep world powers ill at ease.
It was eventually not surprising to discover markets in South Korea and Japan unload at the news with this change in North Korea. Greater than anything, markets hate uncertainty and it's possible there is already a big red question mark where North Korean policy is currently concerned.
Ramifications for the Markets
If order is maintained and in case the latest leader demonstrates more rationality than former heads of state, there is going to be little more than provocative language as well as some maneuvers. The South Korean market will sell-off somewhat, the country will probably be nervous, but things will get return to normal in one month or thereabouts time frame.
If North Korea gets aggressive, then all bets are off for South Korean markets and investors in Japan as well as the West will likewise worry and sell off shares (and buy gold). However, if North Korea decides to have a new path, probably the long-term outcome of this transformation is going to be a positive for investors as well as the world generally speaking.
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