Investment Strategies for Responding to Sudden Changes in North Korea from a South Korean Perspective

North Korea is a highly closed-off nation. Having experienced the Korean War, South Koreans harbor deep distrust toward North Korea and must always be prepared for the possibility of a North Korean invasion.

At the same time, South Koreans are mindful of the possibility of unification following the collapse of the North Korean regime or a sudden change in circumstances.

Let us explore what assets Koreans find attractive today in the event of a sudden change in North Korea.

We decided to reference the Moon Jae-in administration’s North Korea policy, which has pursued economic and social exchanges with North Korea for this purpose.
The Moon Jae-in administration had effectively prepared for exchanges with North Korea and, in the process, established investment priorities to improve North Korea’s infrastructure.

Investment plan for sudden crises in North Korea; Views of Korean

They had limited budgets and needed effective infrastructure investment. What would they have chosen first?

1. Airport : Construction, Civil Engineering
Surprisingly, airport reconstruction came first. In fact, this was beyond most Koreans’ expectations. Most had anticipated that South Korea would improve railways and repair roads first for North Korea’s infrastructure development. However, the Moon Jae-in administration was found to have reviewed the reconstruction of Samjiyon airport near Mount Baekdu.
This is because airport reconstruction imposes fewer limitations on transporting people and supplies.
Development can begin in various regions of North Korea, not just areas close to South Korea, and faster simultaneous infrastructure improvements can be expected.

2. Energy : Electricity, Power generation (Solar, Wind, etc.)
How can North Korea’s electricity shortage be resolved? A stable power supply is essential for infrastructure investment. The South Korean government has seized upon this point.
Currently, investing in renewable energy sources such as solar and wind power could be the most cost-effective method, and it is known that this is already the preferred method of power generation for the North Korean government.

3. Road : Construction, Civil Engineering
Existing North Korean highways can be repaired and upgraded, enabling the transport of personnel and materials from South Korea to North Korea.

4. Defense industries
South Korea must prepare for the possibility of both full-scale and localized conflicts. North Korea possesses a large stockpile of conventional weapons and well-trained soldiers. This suggests that sudden crises could escalate into major wars.

Sudden changes in North Korea could create opportunities for investment in South Korea’s capital markets

Today, South Korea possesses economic and military power that overwhelmingly surpasses North Korea’s. This suggests that a sudden change in North Korea could actually enhance the investment appeal of South Korea’s capital markets.

(EWY ETF) iShares MSCI South Korea Capped ETF

Website about the Moon Jae-in administration: http://webarchives.pa.go.kr/19th/english.president.go.kr/

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