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Global market and political reactions to Kim Jong-il's death

A quick glimpse of financial market and political leader reactions to the death of North Korea's leader.

Markets and political leaders have naturally reacted to the death of the unique North Korean leader Kim Jong-il.

Initially, Asian markets closed lower on the news:

South Korea’s Kospi [KR:0100 -3.43%] at 1,776.93
China’s Shanghai Composite [CN:000001 -0.30%] to 2,218.24
Japan’s Nikkei Stock Average [JP:NIK -1.21%] to 8,296.12.
Hong Kong’s Hang Seng Index [HK:HSI -1.18%] to 18,070.21
Australia’s S&P/ASX 200 index [AU:XJO -2.38%] to 4,060.40
Taiwan’s Taiex - 2.2% to 6,633.33.

Asian currencies also took a hit.

Kathleen Brooks, Research Director UK EMEA at said:

... the biggest moves happened in the Asia session after the news of the death of North Korean leader Kin Jung-Il broke. This hurt the yen and the Korean won due to their geographical proximity to North Korea. However, after breaking above 78.00 on the news, USDJPY has nearly given back all gains and remains below 78.00. The South Korean won has remained under pressure, and likewise the Kospi (the South Korean index) is also under pressure.

Although his son Kim Jong-un has been described as his father’s successor, transitions in power in a country that holds nuclear weapons and where the military is incredibly powerful rarely happen smoothly, so geopolitical risk has added to uncertainties in the region as we get near to the end of the year.

For investors this has added to risks and fears emanating from elsewhere as we near the end of the year. Not only is 2011 gearing up to be one of the most event-filled years in recent memory, but, interestingly, the majors are likely to end up fairly close to where they started 2011. EURUSD dipped below 1.30 at the end of 2010 post the Irish bailout. A year later and Italy and Spain have been dragged into the fray and the currency is back at the same level. Something doesn’t feel right about that – the euro crisis has escalated dramatically in the past year and yet EURUSD hasn’t really moved.

In Europe, initial market weakness was expected but has had little direct effect on European bourses as yet.

Joshua Raymond, Chief Market Strategist, City Index summarised with:

(emphasis, our own)

Defensive stock sectors such as pharmaceuticals and tobacco firms helped to push the FTSE 100 marginally higher despite opening weakness as investors reacted to the death of North Korean leader Kim Jong Il.

The death of Kim Jong Il had been long expected in truth with rumours speculating over the deterioration of the leaders condition earlier this year. The groundwork had been long in place for his replacement, his son Kim Jong Un, and so the transitional phase of the new leader of the communist state could be less traumatic than feared. That said, tensions are high in the region with the South Korean army on alert and investors are keeping a firm eye on developments in the region which may destabilise the region.

In European trade, the passing of Kim Jong Il has seen little fundamental reaction in European equities. Traders have started to position themselves for the holiday season and expected lower volumes in the market, which can exacerbate market moves and keep a volatile edge to trading. As such, defensive stock sectors have been sought by investors, who are looking to diversify their portfolios and deleverage the amount of risky asset classes they hold.

Meanwhile, reports show that  official statements are coming in thick and fast from political leaders and North Korea itself:

In the US, the White House press office said:

“At midnight tonight, President Obama spoke with Republic of Korea President Lee Myung-bak to discuss the situation on the Korean Peninsula following the death of Kim Jong-Il. The President reaffirmed the United States’ strong commitment to the stability of the Korean Peninsula and the security of our close ally, the Republic of Korea. The two leaders agreed to stay in close touch as the situation develops and agreed they would direct their national security teams to continue close coordination.”

Slightly different then to the previous comments from former US President George W. Bush about North Korea being the "outpost of tyranny," due to the countries nuclear weapons programme. 

Interestingly, at 12:12 GMT today, Sky News reported that "North Korea 'Test Fires Missile' After Kim's Death":

See report here.

And from around the globe, Time magazine has an interesting list of reactions here (a small selection in the blue box below):

Kevin Rudd, Australian Foreign Minister
“The political succession in North Korea is uncertain. It will be difficult to read in the immediate days ahead precisely what will transpire in terms of the future of the North Korean leadership.”

Martin Nesirky, United Nations’ spokesman
“The secretary general is aware of the reports but we don’t have an immediate reaction.” 

Osamu Fujimura, Japan’s chief government spokesman
“We express our condolences upon receiving the announcement of the sudden passing of Kim Jong-Il, the chairman of the National Defence Committee of North Korea. The Japanese government hopes that this unexpected development will not have any adverse impact on the peace and stability of the Korean Peninsula.”

- Euromoney Skew Blog

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