In the wake on Kim Jong-Il's death, neighboring regions, diplomats, and allies are giving consideration to a North Korean contingency with long-term ally China -- a conversation Beijing refuses to have.
Thus far, the transition from Kim Jong-Il to his son, Kim Jong un, is going smoothly. But some worry problems may arise down the road "if a contest for power develops and piles stresses on a state that is already perilously close to economic collapse," reports Reuters.
China is refusing to contemplate such a scenario, but given that North Korea is a nuclear state many are saying such talks are overdue. Even some Chinese thinkers "have increasingly acknowledged privately the need for such an authoritative conversation."
China is an especially important player in the conversation because, aside from bordering North Korea, China supplies much of its food and fuel.
Of course, such talks would be secretive, as to not upset the balance with North Korea. It is possible they are taking place, but evidence suggests they are not under way or being planned.
Reuters reports a wealth of rumored correspondence, the most notable of which indicates China would not interfere in a North Korean collapse. South Korean vice foreign minister Chun Yung-woo says a collapse, due to the country's political and economic instability, may happen within two to three years of Kim Jong-Il's death.
He also says China "would clearly not welcome any U.S. military presence north of the Demilitarized Zone in the event of a collapse." The United States maintains 28,500 troops in South Korea in the event of a crisis with the North.
Based on rumors, China's approach seems to be to let North Korea implode on its own. If that occurs then China, the U.S., and other allies should have a contingency plan in place that creates a unified Korea.
Such unification would surely benefit South Korea, the more profitable and stable of the two countries. In the short term, however, their markets are heavily affected by concern that there will be a power struggle in the Communist nation.
Following South Korea's market may be an excellent way to keep tabs on the situation. Interested in keeping an eye it? We list the eight largest South Korean companies trading on the U.S. stock exchange.
How do you think contingency will affect the South Korean market? (Click here to access free, interactive tools to analyze these ideas.)
1. KB Financial Group
2. Korea Electric Power Corp.
3. KT Corp.
4. LG Display Co., Ltd.
6. Shinhan Financial Group Company Limited
7. SK Telecom Co. Ltd.
8. Woori Finance Holdings Co., Ltd.
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.
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