Across the globe investors are watching the situation in North Korea very carefully. The concern is that a military conflict in the region could have a profound effect on the worldwide economy. After all, any disruption in the trade relationship between East and West would be disastrous for countries and companies from both sides of the ocean.
South Korea is the fifth largest exporter and has the G20’s largest budget surplus, as well as the highest credit rating of any country in East Asia. It has free trade agreements with 75% of the world economy, and is the only G20 nation trading freely with China, the United States, and the European Union simultaneously.
FACT: South Korea was one of the few developed countries that were able to avoid a recession during the global financial crisis.
Despite the South Korean economy’s high growth potential and apparent structural stability, the country suffers damage to its credit rating in the stock market, because of the hostile or aggressive actions of North Korea; especially in times of deep military crises. Time and again this conflict has proven to have an adverse effect on South Korea’s financial markets.
Any military conflict that interrupted trade routes and prevented South Korea from fulfilling its role in the global economy would have dire effects on the economies of many of its international partners. This may have an undesirable effect on stock market and bond holdings.