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North Korea Jitters: ETF Winners and Losers

Sanghamitra Saha
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The global stocks were relieved, albeit for a short spell, early this week from the North Korean tension after dictator Kim Jong-un celebrated the government’s 69th anniversary partying, by choosing to stay away from firing a missile. Short because Kim Jong-un went back to its former self and launched a ballistic missile over northern Japan on Friday (read: High-Momentum and Beta ETFs to Play on Fading Fears?).

North Korea did this for the second time in less than a month. Prior to this, North Korea had launched another ballistic missile which crosses over northern Japan, “before falling into the sea on Aug 29 local time.”

In any case, several global leaders including U.S. President Donald Trump has been quite vocal against North Korea’s antagonistic activities. Japanese prime minister Shinzo Abe called the launch "totally unacceptable."

Following North Korea’s most powerful nuclear test on Sep 3, the 15-member Security Council voted on a U.S.-drafted resolution and slammed North Korea with a new round of sanctions on Monday, prohibiting North Korea‘s key textile exports, and restricting fuel supplies. Former North Korea's partners Russia and China also supported new oil imports limits.

Investors should note that several ETF investing areas come under the watch following North Korea’s activities. While some areas will be hurt, some will gain too. Below we highlight those ETF areas.

Losers

iShares MSCI Japan ETF EWJ

Since two missile launches were close to Japan, the country’s concerns are understandable. On Thursday, a North Korean state agency threatened to “sink” Japan byusing nuclear weapons. So, if violence intensifies ahead, Japan investing may feel some pressure. Though the fund gained about 0.05% on Sep 14, 2017, it lost about 1.2% after hours.

iShares MSCI South Korea Capped ETF EWY

Acting in response to North's latest launch, South Korea has fired its own missile into the sea, as per Reuters. This is because, South Korea is also under Kin Jong-un’s rage. The South Korea government also ordered officials to get ready for likely new threats, such as biochemical attacks and electro-magnetic pulse. EWY, gained 0.5% on Sep 14, but retreated about 0.04% after hours. 

Winners

PowerShares Aerospace & Defense ETF PPA

The higher the tension will be between North Korea and the United States, the more gainful it will be for the defense stocks and ETFs. Shares of Raytheon, Lockheed Martin and Northrop Grumman are likely to benefit if North Korea tension escalates. The fund was up about 0.3% on Sep 14 while the product added 0.04% after hours (read: 3 Top Ranked Aerospace and Defense ETFs For Your Portfolio).

SPDR Gold Shares GLD

Gold is always viewed as a safe-haven asset. Such geopolitical risks are likely to spur safe-haven bids, which is why gold bullion may gain ahead. The fund added about 0.4% on Sep 14 and 0.6% after hours (read: North Korea's Nuclear Test Drives Safe Haven ETFs Higher).

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GOLD (LONDON P (GLD): ETF Research Reports
 
ISHARS-JAPAN (EWJ): ETF Research Reports
 
ISHARS-S KOREA (EWY): ETF Research Reports
 
PWRSH-AERO&DEF (PPA): ETF Research Reports
 
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