But one stock, described as a bellwether of tensions in the Korean peninsula, is making an outsized move higher. Shares of Victek, a South Korean maker of military equipment, surged
by as much as 20%. South Korea, a longtime US ally and North Korean
adversary, may need to increase investment in its defense systems if
conflict escalates, Bloomberg reported.
Shares of Speco, another Korean defense stock, surged 13%.
President Donald Trump said Tuesday that the US would respond to threats from North Korea with “fire and fury” following reports that the country had built nuclear warheads small enough to fit on a long-range missile.
North Korea responded a few hours later by threatening to
strike Guam, a US territory in the Pacific that holds key military
“Trump’s rhetoric appears to be the sternest by a US president
since 1993, when Bill Clinton, during a visit to the North-South border,
warned that it would be pointless for Pyongyang to develop nuclear
weapons, because if they ever used them, ‘it would be the end of their
country,'” BMI Research said in a note on Wednesday.
“Following Trump’s comments, the share price of South Korean electronic warfare equipment manufacturer Victek spiked sharply to KRW5,110 (see chart below).
As we have mentioned previously, Victek’s share price is a key
bellwether of tensions on the Korean Peninsula. It previously spiked to a
record high of KRW6,180 on April 11, 2017, when Trump appeared to be
gearing up for military action against the North. Any further
provocations by Pyongyang could send the share price above the April
“Despite the increase in tensions, we still believe that a US
strike on North Korea is unlikely, as the notion appears to lack the
support of top US political and military leaders, owing to the dangers
of triggering a new war in North East Asia that could devastate South
Korea and drag in Japan and China,” BMI said.
Without a real risk to the global financial system, markets may quickly rebound from this geopolitical scare as it often has. Meanwhile, the defense companies that would benefit in the event of a conflict are worth keeping an eye on.