Kim Jong-Il's death marks the end of an era for North Korea, but the story has taken over headlines for other consequential reasons as well. His death and the potential succession of his son bring new security concerns for the region.
North Korea's nuclear power
Unfortunately, Kim Jong-Il's death coincides with nuclear testing.
The National Post reports: "Security concerns over the hermit state, that in 2010 shelled civilians on a South Korean island and is blamed for the sinking of one of its warships earlier that year, were heightened after Seoul said the North had test-fired a short range missile prior to the announcement of Kim's death."
Naturally, neighboring regions have expressed concern.
At the same time, control of the regime is said to be transferred to Kim Jong-Il's 29 year old son, Kim Jung-Un. Unfortunately, little is known about him, and many worry he might need a military show of strength to help establish his credentials.
"We hope this sudden event does not have an adverse effect on the peace and stability of the Korean peninsula," says Japan's Chief Cabinet Secretary Osamu Fujimura at a hastily called ministerial meeting on security.
South Korean trading
South Korea's markets were heavily affected by concern that there would be a power struggle in the communist nation (via Bloomberg). Kim Jong-Un's lack of credentials added to the uncertainty.
South Korea's Kospi stock index dropped 3.4%, the most in five weeks. Its currency, the won, sank 1.4% to more than a two-month low. Three-year bond futures declined 0.3%.
In an appropriate response to military concerns, Bloomberg reports shares of companies that produce military supplies in South Korea rallied. "Speco Co., a defense equipment manufacturer, Victek Co., which makes electronic warfare equipment, and Huneed Technologies, a military communications equipment manufacturer, all rallied by the daily limit of 15 percent."
Geopolitical risks might keep investors away, and on guard, from the Korean Peninsula for some time to come.
Are you interested in keeping an eye on South Korea's market? We list the eight largest South Korean companies trading on the U.S. stock exchange. How do you think they will fare under Kim Jung-Un's rule? (Click here to access free, interactive tools to analyze these ideas.)
1. KB Financial Group
2. Korea Electric Power
3. KT Corp.
4. LG Display Co.
6. Shinhan Financial Group Company
7. SK Telecom Co.
8. Woori Finance Holdings Co.
Interactive Chart: Press Play to compare changes in analyst ratings over the last two years for the stocks mentioned above. Analyst ratings sourced from Zacks Investment Research.
Kapitall's Rebecca Lipman does not own any of the shares mentioned above Data sourced from Finviz.