North Korea's Failure Strains Chinese Relations

By Kapitall | April 17, 2012 AAA


Written by Danny Guttridge

To celebrate the 100th birthday of the deceased founder of the North Korean regime, Kim Il-sung, the country decided to perform a rocket launch test. The launch test failed, but they are expected to move forward with another. Their goal with the tests is to show their military strength, and also to mark the rise to power of the next in succession, his grandson Kim Jong-un, according to Reuters.

The missile launch was claimed to be a satellite orbit attempt, though Japan believes it was for a nuclear missile program. The announcement of its failure was a highly unusual event for the regime, and it presents a large challenge for the new leader, who is believed to be in his late twenties. In addition, the launch was also a breach of United Nations Security Council sanctions, and drew reproof from several countries.

The launch test was also a breach in an agreement made with China after they had given North Korea aid. ShenDingli, a professor and regional security expert at Shanghai's Fudan University said, "After giving so much aid to North Korea, it still did not listen to China, and this hurt China-North Korea relations and erodes domestic support in its continued support of North Korea. This also undermines confidence in the U.S.-China relationship, and whether China had done enough to persuade the North. So, China is also a loser, but not as big a loser as if North Korea succeeded in its launch."

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Business Section: Investing Ideas
With a possible increase in volatility in Chinese and North Korean politics,
following South Korea's market may be an excellent way to keep tabs on the situation. After all, their markets are heavily affected by concern that there will be a power struggle in the communist nation.

Interested? We list the nine largest South Korean companies trading on the US stock exchange. Do you think these stocks will see movement?

List sorted by market cap. (Click here to access free, interactive tools to analyze these ideas.)



1. POSCO (NYSE:PKX): Engages in the manufacturing and sale of steel products in South Korea and internationally. Market cap is at $25.69B

2. Shinhan Financial Group Co. Ltd. (NYSE:SHG): Provides financial products and services to corporations, governments, institutions and individuals in Korea and internationally. Market cap is at $17.49B

3. KB Financial Group, Inc. (NYSE:KB): Operates as a holding company for Kookmin Bank that provides various financial products and services to individuals, small- and medium-sized enterprises and corporate customers in Korea. Market cap is at $14.44B

4. Korea Electric Power Corp. (NYSE:KEP): Engages in the generation, transmission and distribution of electricity in Korea. Market cap is at $12.42B

5. Woori Finance Holdings Co. Ltd. (NYSE:WF): Provides various banking and financial products and services in Korea. Market cap is at $8.98B

6. SK Telecom Co. Ltd. (NYSE:SKM): Provides wireless telecommunications services using code division multiple access (CDMA) and wide-band CDMA technologies. Market cap is at $8.97B

7. LG Display Co., Ltd. (NYSE:LPL): Engages in the manufacturing and supply of thin film transistor liquid crystal displays (TFT-LCD) to original equipment manufacturers and multinational corporations primarily in Asia, the United States and Europe. Market cap is at $8.70B

8. KT Corp. (NYSE:KT): Provides integrated telecommunications services in Korea. Market cap is at $7.10B

9. MagnaChip Semiconductor (NYSE:MX): Designs and manufactures analog and mixed-signal semiconductor products for high-volume consumer applications. Market cap is at $437.55M

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Kapitall's Danny Guttridge does not own any of the shares mentioned above.

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