Trump-Kim summit: History or reality TV?

THERE was no way the Americans were going back to Pyongyang this time. One of life's harsh lessons: a summit with the North Koreans on their home turf can get downright unpredictable. When US Secretary of State Madeleine Albright made her historic trip to Pyongyang in 2000, she was taken to a stadium propaganda event, and had to applaud politely beside Kim Jong Il as thousands celebrated him as their "dear leader".

Singapore, on the other hand, is neutral ground.

This time, with the US' surprising acceptance of the summit only in March, and its subsequent cancellation followed by reinstatement, it is clear that the North Koreans have met their match in the sitting US president, who is no less capricious and capable of brinksmanship.

The tight timeline and freewheeling personalities of both leaders raise genuine questions about what to expect on June 12. If a positive meeting comes to pass, we anticipate a near-term easing of market risk sentiment, and an overall relief rally as the trend of nuclear escalation between the two countries fades in the meantime. The South Korean and Japanese markets are most sensitive to North Korean risk and would benefit most from a successful summit.

A risk-on move could trigger some outflows from safe havens, including gold, treasuries and the yen, and also defence sector stocks which tend to be inversely correlated with geopolitical tensions. In the long run, however, the market will discern if there are deeper economic implications, particularly for South Korea.

While dialogue and friendly relations are positive developments, the real impact of the summit will be measured by any progress made towards the difficult and complex goal of CVID: the "complete, verifiable and irreversible denuclearisation" of the Korean peninsula.

No one who has bet on Korean denuclearisation has ever won. Back in 1994, the US signed a denuclearisation agreement with North Korea. In 2005, at the Six-Party Talks which also included the US, North Korea similarly committed to "abandoning all nuclear weapons and existing nuclear programmes." Each time, North Korea succeeded in continuing its nuclear programme undercover, while stalling for time and manoeuvering to ease sanctions.

Ultimately, their top priority is regime preservation, and they believe nuclear weapons provide critical leverage to that end. It is not lost on them that Libya's Muammar Gaddafi, met with a violent end only seven years after giving up his country's nuclear programme.

To strengthen his regime's legitimacy, Kim Jong Un seeks global recognition as the ruler of a de-facto nuclear state: a world leader who can meet and deal with the US President as an equal. Previous US presidents have assiduously avoided doing the Kim family this favour.

Hence it is surprising Donald Trump has agreed to meet Mr Kim without first extracting significant concessions.

There is rightful cynicism that Mr Trump - with one eye on the mid-term elections, and anxious for his place in history - is more focused on achieving a symbolic victory, through a peace treaty formally ending the 1950-1953 Korean War, rather than the laborious task of meaningful nuclear disarmament. Tellingly, his supporters have already nominated him for the Nobel Peace Prize.

Still, diplomatic talks are greatly preferable to shooting off nuclear missiles, and credit must be given to both leaders for getting here. It would not be the end of the world if we got a peace treaty and some face-saving concessions from Mr Kim. There is also good reason to hope for more.

By distancing himself from the (poorly named) "Libya Model" - which requires North Korea to hand over all of its nuclear weapons at the outset - MrTrump appears sympathetic to Mr Kim's needs for solid guarantees that his regime will be preserved, before any genuine attempts for denuclearisation can be made. This is a good start.

International sanctions have also taken their toll on Mr Kim. The carrot of economic aid, bundled with other assurances, should tilt the discussion in a favourable direction.

China and South Korea both remain active in the background as influential power brokers, and they want long-term security and stability. The recent pace of nuclear escalation has alarmed these North Korean neighbours. China, accounting for over 90 per cent of North Korea's trade, holds particular sway over Mr Kim; and it is also keenly aware that being a Trump-Kim facilitator can yield valuable leverage in its own trade negotiations with the US.

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