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North Korea and the US finally smoke the pipes of peace: Angel Broking

Posted On: 2018-06-14 12:07:37

Views of Mr. Mayuresh Joshi (Fund Manager, Angel Broking):

"If you have heard the famous Paul McCartney number on the "Pipes of Peace", it has a certain nostalgic and optimistic element to it. The pact signed between Donald Trump and Kim Jung Un of North Korea similarly raises a sense of hope across the Asian region. For a long time, North Korea had behaved like a loose cannon and the problem became all the more pronounced because it had developed nuclear capabilities. From that perspective, the US-North Korea pact assumes a lot of significance.

The break-up of North Korea and South Korea after the 1950 war was an extension of the cold war. That was the time the US and Russia was the undisputed superpowers. With China emerging as an economic and military power in the last twenty years, both Russia and the US see merit in gravitating towards each other. That should ideally put an end to the North-South divide in Korea.

What could be the large implications of this move? Firstly, this deal will make the world view Trump in a different light altogether. Trump has smartly combined his threat of protective tariffs on imports with a more pragmatic long term pact with North Korea. This will largely improve the position of the US in the eyes of other nations. For now, US leadership appears to be assured. Secondly, the volatile Asian region will now be a lot more peaceful and that should positively rub off on markets like China, Japan and South Korea which are contiguous to North Korea. Thirdly, with oil becoming less relevant and Asia less volatile, the last of the geopolitical risks may be out of the way. World markets may deserve a stability premium.

To be fair, this is only a statement of intent. If you read through the details of the agreement, North Korea has only promised to work towards de-nuclearization in the Asian region. That is still a good start and will bring North Korea into the mainstream of Asian growth. The US will assure security to North Korea and that will also help Trump keep the balance in the Pacific Ocean and the South China Sea. If the sharp up move in the Nifty was any indication, Indian markets have surely welcomed the Trump-Kim initiative."

Source: Equity Bulls

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