A successful end of the US-North Korea talks tomorrow at 1:00 GMT can boost Chinese stocks and stock markets in the US, according to a background study on financial market developments in past events over North Korea.
A negative result from the meeting of the two leaders could harm European stocks, according to the analysis.
President Donald Trump will hold a historic meeting with North Korean leader Kim Jong-un in Singapore. It is not certain whether leaders can agree on issues such as the immediate withdrawal of nuclear weapons and the alleviation of sanctions.
If the two leaders come close to a resolution, Chinese stocks are likely to benefit the most, according to the Kensho analysis, a quantitative tool used by hedge funds.
IShares China ETF (FXI) futures rose 0.9% on average on the two trading days after negotiations between North and South Korean leaders showed improved relations. The study looks at 19 cases since Kim took office at the end of 2011.
FXI tracks companies like Tencent, Bank of China, PetroChina and Air China, a state-owned carrier that resumed flights between Beijing and Pyongyang earlier this month. Most of the trade with North Korea is with China, which supplies most of the country’s oil.
The S & P 500 rises by 0.2% on average, according to Kensho. The Cboe Variability Index (VIX), a measure of fear, declined by an average of 3% at a similar event.
When concerns over North Korea’s nuclear threat increase, European and emerging markets are among the losers according to this quantitative analysis.
South Korean stocks are down 0.3 percent and iShares MSCI Japan ETF (EWJ) declines on average about a quarter of a quarter when tensions around North Korea are rising, according to Kensho’s analysis.
Trader Nikolay Georgiev