North Korea ten­sions ‘re­main con­tained,’ say No­mura an­a­lysts

Financial Mirror (Cyprus) - - FRONT PAGE -

Tokyo-based No­mura said it ex­pects the North Korea ten­sions to stay con­trolled, even after the rogue state on Tues­day fired a mis­sile over Ja­pan, ac­cord­ing to a CNBC re­port.

“We see to­day’s provo­ca­tion as in line with our base case for the [Korean] penin­sula — that ten­sion will re­main el­e­vated for some time, but also re­main con­tained,” a team of No­mura re­search an­a­lysts said in a Tues­day note led by Hong Kong-based econ­o­mist Mi­noru Nogi­mori.

The an­a­lysts cited a Fri­day re­port from Alas­tair New­ton, co-founder and director of No­mura geopo­lit­i­cal con­sul­tant Ala­van Busi­ness Ad­vi­sory, that low­ered the prob­a­bil­ity of war break­ing out on the Korean penin­sula to about 35% from nearly 50%.

Although New­ton said the prob­a­bil­ity will “al­most cer­tainly” fluc­tu­ate, none of No­mura’s three early warn­ing sig­nals of po­ten­tial U.S. mil­i­tary ac­tion have yet ap­peared this year.

The sig­nals are: a U.S. gov­ern­ment evac­u­a­tion or­der to U.S. ci­ti­zens in South Korea, a large scale U.S. mil­i­tary build-up near the Korean penin­sula re­sem­bling 1994, and a ramp-up of the U.S. de­fense readi­ness con­di­tion to level three from level four, the No­mura re­port said.

Hua Chun­y­ing, spokes­woman for China’s Min­istry of For­eign Af­fairs, ques­tioned in a brief­ing the ef­fec­tive­ness of the ex­er­cises and called for “re­straint” and di­a­logue.

News of the mis­sile fir­ing sent global stocks mostly lower and gold higher as in­vestors sold risky as­sets and turned to safe-haven trades.

The South Korean won fell nearly 0.9% against the U.S. dol­lar, to 1,128 won overnight and was last trad­ing near 1,124 won, ac­cord­ing to Fac­tSet.

The iShares MSCI South Korea Capped ETF (EWY), which counts Sam­sung Elec­tron­ics and Hyundai Mo­tor among its largest hold­ings, traded more than 1% lower Tues­day morn­ing. EWY is up 28% so far this year.

“Ten­sions be­tween North Korea and the US have, in our view, reached lev­els un­seen since 1994, when the Clin­ton ad­min­is­tra­tion con­sid­ered air strikes on North Korea’s main nu­clear fa­cil­ity at Yong­byon,” the No­mura an­a­lysts said.

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