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Investors say ‘so far, so good’ on the historic Trump-Kim summit

When Mr Trump shook hands with Mr Kim on Tuesday, it kicked off a meeting between two adversaries that only last year had seemed on the verge of nuclear conflict.

[TOKYO] After watching the historic handshake between US President Donald Trump and North Korean leader Kim Jong Un, Kazuyuki Terao was mostly positive.

“We don’t know yet how things will unfold,” said the chief investment officer for the Japan arm of Allianz Global Investors. “But it’s hard to imagine they’ll turn out badly from here.”

Markets were slightly less enthusiastic. Stocks in Japan and Hong Kong edged higher, while shares in South Korea swung between gains and losses. In currencies, the dollar trimmed its earlier gains and the yen fell slightly. The South Korean won rose, reversing its earlier decline.

When Mr Trump shook hands with Mr Kim on Tuesday, it kicked off a meeting between two adversaries that only last year had seemed on the verge of nuclear conflict. Investors across Asia and the world are watching for how the occasion will impact markets.

Here are some other views of traders, money managers and analysts.

No Walkout

“The good news is it’s been more than two minutes and nobody’s walked out,” said Olivier d’Assier, head of applied research for Asia-Pacific at Axioma. “Trump had said he’d know in the first minute if it was real or not. Since he’s still in there we’d have to take it that this is positive.”

Positive Expectations

“Today’s moves in markets show there’s consensus in markets that the outcome today will be positive,” said Jung Sang Jin, head of equities at Korea Investment Management Co. Ltd.

Just the Start

“Enough with all the speculation and all the teasers, it’s showtime!” Stephen Innes, head of trading at Oanda Corp., wrote in a note to clients. “Few traders are expecting anything definitive to come out of the summit. However, investors remain ever so vigilant for potential fireworks. But keep in mind, this is merely the beginning, and we’re not even into the first chapter let along the epilogue.”

Contrarian View

“I am not expecting anything from markets’ point of view from this summit,” said Michael McCarthy, chief market strategist at CMC Markets in Sydney. “The large part of this is about political theater. It doesn’t seem likely that we will see any substantial changes. What has become clearer is what while there is high-level rhetoric, it leads to very little action.”

“North Korea, South Korea, China, and Russia are ready for an end to the 65-year absurdity, but the US is the problem, so I hope for and expect a continuation” to discussions, Jim Rogers, chairman at Rogers Holdings Inc. said by email.

Downside Risk

“The market, of course, is still wary of the downside risk of the summit turning into a bit of a disaster, bringing nuclear tensions coming strongly back to the fore,” said Nick Twidale, chief operating officer of Rakuten Securities Inc’s Australian unit. “Investors will be ready for this eventuality, especially given the personalities of the two leaders involved and this weekend’s G7 performance from Trump.”

Global Trade

While the Trump-Kim summit offers to start a dialog that will bring an end to sanctions on North Korea and the removal of nuclear weapons, it’s “not nearly as important” as the threat of retaliations in global trade, Rob Carnell, ING Bank’s chief economist for Asia Pacific, wrote in a note.

Three Scenarios

Alex Wong, a director of asset management at Ample Capital Ltd. in Hong Kong, says he sees three scenarios for the meeting. The first is a full agreement, which he sees as unlikely. The second: “I don’t think they can sort out everything in the first meeting,” he said. “The most likely scenario is that they have a very friendly meeting first, then organize another one to discuss all the issues in near future.”

And the third: “Walking away unhappily,” Wong said. “They came all the way here with months of preparations, so I think this scenario is unlikely.”

Central Bank Meetings

Whatever the case, Jingyi Pan will spend her day “writing, writing, writing.” It’s a busy week for Pan, a market strategist at IG Asia Pte.

“There are still central bank meetings, lest we forget,” Ms Pan said.

Ayako Sera, a strategist at Sumitomo Mitsui Trust Bank Ltd. in Tokyo, agreed.

“It’s like there’s a feast going on,” she said of the summit. But “globally, it’ll be the Federal Reserve and European Central Bank meeting outcomes that are important for this week.”


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