There are tremendous resources in the North Korea that could be exploited, said emerging markets funds manager Mark Mobius, as the North Korea supremo Kim Jong-un and US President Donald Trump made a joint statement at the Singapore summit.
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"The consumption revolution will take place once the standard of living begins to move up. So, at the beginning it would be the resources and the transport – railroads, roads going up North to China and Russia," he said.
"North Korea will be able to catch up very quickly because the educational background is good in the North. Their nuclear capability is a technological feat of amazing proportion," he said and added, "I think they will catch up very quickly and the South will help them do that."
Q: Assuming that prosperity is coming North Korea's way, that sanctions are lifted, the economy starts to open up, it is kind of interesting in the sense that all the neighbours around North Korea have somewhat advanced on the technology scale; you look at South Korea for instance, Japan, even the Chinese going up the technology scale, however, this as country would be very far behind. But would that mean to have a country like North Korea then open up with a big workforce potentially, fairly cheap workforce in the region?
A: North Korea will be able to catch up very quickly because the educational background is pretty good in the North. Let us face it, look at what they developed; the nuclear capability is a technological field with amazing proportion. So I believe they will catch up very quickly and the South will help them do that.
Q: As a play by sectors, would you say that this is a country investors should look at from an industrial side rather than consumption because early on it seems as though many of the people are still somewhat poverty stricken and wages still would be a challenge, getting money to households for basic items, do you just look at it from the industrial side?
A: We look at it first in terms of the mining capability where earth, oil, gas are tremendous resources in the North that could be exploited; so that is number one priority as far as we are concerned.
Then of course the consumption revolution will take place once the standard of living begins to move up. So I would say the beginning would be the resources and the transport as I mentioned. Rail roads, roads going up North to China and to Russia.
Q: We have just seen the dollar index flirt with negative territory, in fact it does seem as though the market is beginning to fade some of the positivity that we saw very early on from the deal signature. You are on record as saying you anticipate a 30 percent drop in US equity markets. How do we put the context of this positive signal on Korea and some emerging Asian markets with your broader call that you think that we might see de-risking in western markets?
A: The first thing I think this good news of an agreement will fade because the reality will set in, people would begin to realise it is not going to happen overnight, it is going to take years in order for the North and South to get together and for the US to get comfortable with what they are doing. Then the second thing is that we have had a bull market in the US for so long, it is time for correction.
I am not going to say it is going to be disaster, but a correction is long overdue and usually corrections take place when everybody is optimistic, when everyone expects the market to keep on going up. So I do not see a big disaster, but I believe that 30 percent is a reasonable correction, particularly when you consider that you have the ETFs in this market. ETFs now represent 40 percent of the market.
They all move in the same direction at the same time. So, correction like that is quite possible. I am just telling people be ready for that and be ready to buy in again.
First Published: Jun 12, 2018 11:35 PM IST