As the barely-together, rotting olive branch that has been holding North and South Korea together snaps, it’s worrying news for the world and its markets. In what could be attention seeking provocation or something which will escalate, North Korea has been firing artillery shells at a residential island in South Korea. South Korea has returned fire and they have both been trading blows since, the comparably measured hostility from the DMZ having reached boiling point.
The Demilitarised Zone (DMZ) between North and South Korea is a patch of territory where each army stands, day in, day out, pointing their guns at the other. Near the DMZ is Seoul, capitalist and US-friendly South Korea’s capital. And here much of the trading on the South korea Stock Exchange happens.
Already, a market analyst at South Korean Samsung predicted that, “inevitably,” the stock market will open slower from the act of aggression, reports Reuters. But Samsung would downplay it if possible. It says this is more serious than testing missiles, but less serious than nuclear testing – but civilians have been targeted.
An analyst for Tong Yang Securities tells Reuters: “The North’s provocation historically sent shockwaves to the stock market, which has subsequently returned to normal. The latest incident may pose more risk as some South Koreans were reportedly injured by the North’s fire.”
What will happen? Many of the cogs in the electronics market are oiled by big business in South Korea: Samsung, Hynix, LG and others. It could very well have a domino effect. The KRX100 is down 29.23 points, the KOSPI is down 15.40 points and the KOSDAQ is down 4.40 points.
And what of the neighbours? Japan must be worried as North Korea has shown aggression to it before. China, while historically more sympathetic to North Korea than the rest of its world, doesn’t want disruption in Asia: its strength and its power is based on trade.
Like incidents before, the situation may blow over. But it is a determinedly heavy act of aggression and there’s every possibility the world will have to tread carefully.