‘North Korea’s H-Bomb Threat Has Limited Impact’ Analyst Imagines

If you’re in South Korean equities, you’d be forgiven for being a bit nervous.

Yes, earnings growth is spectacular and yes, valuations are a bargain. But, the escalating rhetoric between Kim and Trump makes it impossible to get comfortable.

Throw in the fact that South Korean markets saw a veritable avalanche of inflows during the first seven months of the year (i.e. some folks believe things ran too far, too fast despite the compelling fundamentals) and you’ve got a recipe for pullbacks or at least for episodic bouts of selling.

Well sure enough, the Kospi has now declined for four days in a row, capping things off by falling 0.75% on Friday after North Korea’s top diplomat suggested Kim may be considering detonating an H-bomb in the pacific.

Note that the Kospi has had two four-day losing streaks in the past three weeks:

Unsurprisingly, those stretches coincide with flareups in the North Korea drama.

Of course common sense eludes some commentators. “North Korea’s threat to test a hydrogen bomb is having a limited impact on South Korean equities today and the benchmark is falling mainly because of a decline in commodities and U.S. equities Thursday”, Seo Sang-Young, strategist at Kiwoom Securities, imagines.

Sang-Young’s “analysis” got even more comical. “If the North Korean threat had a meaningful impact, Kospi would have fallen 2%-3%.”

I see. So an H-bomb-related selloff is “2-3%” while a commodities-related selloff is 0.75%. Clearly, that’s nonsense.

And it got still more ridiculous. “Even if North Korea fires an ICBM on the October 10 anniversary of the foundation of the ruling party, the impact would be temporary,” Sang-Young concluded.

Time-stamp it. Caveat emptor. And all the rest.