“Today a new moon is in the sky”, these were the newsreel reports 60 years ago, when on the 4th October 1957 Sputnik was launched into orbit by the Soviet Union. The shiny beach-ball sized radio transmitter, built in just 2 months, certainly ignited the space race and inspired many: the US formed NASA in its wake and less than 4 years later the USSR used the same R-7 missile to put cosmonaut Yuri Gagarin into space, in another 4 years Neil and Buzz would put American footprints on the Moon.
Safe haven assets rallied today after North Korea fired a missile 2,700km straight over Hokkaido, the Japanese northern main island. This is the first time they have successfully fired a missile over Japanese territory in almost 20 years. This defiant and provocative military demonstration was described as, ‘an egregious threat to the peace and stability of the Asia Pacific region’ by Shinzo Abe, the Japanese Prime Minister. Being a man of detail, Trump responded to the media questioning, ‘What are you going to do about North Korea?’ stating, ‘We’ll see. We’ll see.’ as he left to meet the thousands in the Houston area devastated by Hurricane Harvey. He has since further clarified the situation stating that ‘all options are on the table’.
With North Korea flexing its muscles, the first 100 days in office for South Korean President, Moon Jae-in have been testing. Despite the obvious distractions, Moon’s administration has already driven forth with some election promises, including a shift to an ‘income-led economy’; by way of introducing his five-year economic policy blueprint to address income inequality and encourage job creation. The presidential administration has also: had a supplementary budget (KRW 11.03tn) approved, introduced further policies to tackle speculative activities in the housing sector (including tightening mortgage rules), and unveiled a tax overhaul proposal.
Currently we do not have any exposure to South Korean debt, this is due to relative value rather than concerns over the nation’s financial situation. Korea is indeed a four star country under Stratton Street’s Net Foreign Asset (NFA) scoring system and our estimates suggest that by 2019 Korea should actually improve to a five star ranking.