How Will Kim Jong-il’s Death Affect Global Markets?
by Jeannette Di Louie, Investment U Research
Monday, December 19, 2011
Kim Jong-il, North Korea’s “Dear Leader” – or crazed dictator, depending on whom you ask – died on Sunday, December 17. According to the official Korean Central News Agency, he suffered a heart attack due to all of the mental and physical stress he was under.
Of course, considering the state of the highly secretive nation of North Korea, we might never know whether that’s the truth or not. Even the country’s next door neighbor, South Korea, can only speculate that Kim may have had a stroke in 2008 and/or been diagnosed with cancer after that.
Global markets didn’t seem to really care how he died though; only that he did. On Monday, December 19, the first trading day after the news hit, Business Insider reported:
“European stock markets were mixed to lower on Monday, as investor confidence waned after the announcement of North-Korean leader Kim Jong-il’s death and amid ongoing concerns of mass downgrades in the Eurozone.”
More than likely, the health of the combined European economy weighed far more heavily on investor’s minds out of the two. But even so, everybody knows that most markets don’t like uncertainty, and can perform irrationally over the slightest hint of it at times.
And let’s face it: The previous North Korean regime, headed by Kim Jong-il, thrived on keeping the rest of the world as unsure as possible.
Now the world has to wonder whether his son will do the same.
Kim Jong-il Leaves All to Kim Jong-un
Kim Jong-un, the third son of Ki Jong-il, first came to global attention in 2009 when his father officially appointed him his successor. But while the world had practically three years to digest that information, we know nearly as little about him today as we did before his promotion.
And what little we do know about him isn’t very comforting…
The Younger Kim has lived his entire life in North Korea, surrounded by his father’s communist policies, which were enforced by his father’s unquestioned dictatorship. His worldview is therefore likely narrow and unyielding.
Worse yet, he has some seriously scary boots to fill if he wants to live up to his father’s (and there has been no indication that he doesn’t want to fill them). So focused on building up his country’s military might, Kim Jong-il not only bullied the United Nations and the international community repeatedly, but also impoverished his own people who are even now dying of malnutrition and starvation.
And the Markets Go on
As evidenced by the enormous rally global markets experienced on Tuesday, most investors don’t seem to care long term – or even mid term – about who’s leading North Korea.
And really, that’s still up for grabs.
Only 28 years old, Kim Jong-un isn’t the only member of his family with a claim to the throne. Both of his older brothers were once considered likely successors and his uncle by marriage, Chang Song-taek, might very well have been running the government for years now, just behind the scenes.
If Kim remains in power, it will likely be because his uncle can use him as a puppet or because he has cracked down heavily on dissenters. Neither bodes well for the rest of the world.
Yet for better or for worse, the world seems much more focused on the economic health of Europe and the United States. Everything else pales in comparison these days.
More than likely, North Korea and its new “Dear Leader” – or whatever title Kim Jong-un plans to take – will play the same game it has for years: develop its nuclear program, starve its people and make a sometimes painful nuisance out of itself in the international community.
But if it affects the markets in any large way going forward, it will only do so sporadically.
Good Investing,
Jeannette Di Louie
Article by Investment U
