Anyeonghaseyo! The present political and military conditions particularly in the orient are very shaky given the recent artillery attack to South Korea by its neighbor up north. Yesterday (November 23), the world, especially South Korea, was caught off guard when NoKor bombarded Yeonpyeong Island with artillery shells, killing at least 2 and hurting dozens. SoKor, of course, was then forced to return fire and to scramble their fighter planes for defense. North Korea’s attack, by the way, came after it sent a warning to Seoul days earlier, demanding them to their military drills in the area.
The tension between the two Koreas started way back in 1950. In case you do not know, the two Koreas are technically still at war today since no peace treaty was ever signed following the Korean war during the 50′s. Anyway, North Korea, which was ruled by a communist government which was headed by Kim Il Sung (the father of Kim Jung Il), and South Korea with a democratic one, both wanted to unify the entire Korean peninsula under their own government. To unify the region by force, NoKor invaded South on June 1950. North almost took over the whole South but it was not able to get Pusan. The South, UN forces, and the Americans, then rallied and hit Inchon which was a city located at the north west of SoKor. This led the Southern forces to regain control of Seoul. Eventually, they were able to push most of the north forces back behind the 38th parallel.
SoKor, however, continued to attack the north and almost took the whole peninsula. But then the Chinese came to the north’s side and pushed the south forces back below the parallel. As I’ve mentioned, no formal peace treaty between the two was ever signed. Since the major part of the war, skirmishes between the two nations have been continuing every once in awhile near the border. In fact, SoKor was blaming the north for the sinking of its naval ship this March.
So how does the tension between the two Koreas affect the global markets?
Well of course, any threat to global stability especially a potential war between two powerhouses (one economic and the other nuclear) negatively affects the market’s sentiment. At these times, investors rather place their money in safer instruments. The less safe investments like equities would surely take a toll and it did. Ironically, however, this incident in the East further supported the recent rally of the greenback. Again, at times of fear, people move to safe investments like the USD and JPY and away from the higher yielding ones like the AUD, EUR, GBP, etc. Therefore, if any more military conflict between the two occurs, the USD would surely benefit from it. But given the backing of the US to SoKor and the diplomatic stance of the United Nations, it is unlikely that there will be more attacks on either state – unless of course north does their thing again.
By the way, below are some pictures of the former childhood residence of the Northern Korean leader Kim Jung Il that I took during one of my visits in the peninsula this year.
The kid in the pic with the head scratched off (by South Korean tourists) is Kim Jung Il of North Korea.
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