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N Korea at crossroads

North Korea intrigues potential investors

Finance pros seek winners in new frontier market

BANGKOK -- On the night of June 13, over 100 experts in finance and other fields gathered at a members-only social club in Singapore to discuss the historic U.S.-North Korean summit held in the city-state the previous day.

Small talk and drinks were followed by a formal debate by prominent panelists. One expert said the real fruit of the summit was simply that North Korean leader Kim Jong Un experienced Singapore and saw the sort of society he could build through amicable relations with the U.S.

The expert suggested that easing military tensions in Asia could prompt North Korea to open up to the outside world, albeit slowly.

Many critics have dismissed the summit between Kim, who serves as chairman of the ruling Workers' Party of Korea, and U.S. President Donald Trump as a failure. After all, it remains uncertain how "denuclearization" of the Korean Peninsula -- the focal point of the summit -- can be achieved.

Professional investors, though, seem determined not to miss the moment the wheel of history starts turning.

Jim Rogers, a well-known investor living in Singapore, appeared on TV following the Trump-Kim summit and said that as soon as it becomes possible to invest in North Korea freely, he is "going to start making progress."

As things stand now, Rogers said he is investing in Korean Air Lines as an alternative. He predicted that the South Korean flag carrier will benefit significantly if peace between North and South progresses, resulting in brisk movements of people between them.

Rogers is not alone in eyeing North Korea.

Gabriel Schulze, who leads SGI Frontier Capital, an investment fund with bases in Singapore and Ethiopia, is one of those who lobbied Jared Kushner, Trump's son-in-law, to make the summit happen. SGI is known for its investments in "frontier markets," which are perceived to be higher-risk and higher-return gambles than investments in more conventional emerging markets.

Schulze pushed for Trump and Kim to meet, apparently, because he considers North Korea one of those frontiers.

If North and South Korea unify, infrastructure demand would total between $2 trillion and $3 trillion over 10 years, according to a note by Katsuyuki Hasegawa, deputy head of Mizuho Research Institute's Research Division. Hasegawa gave the figures based on studies by U.S. and South Korean researchers.

Such bold predictions for the near future capture investors' imaginations more than the details of denuclearization. 

In a poll by Politico, a U.S. political news site, 54% of respondents said the Trump-Kim summit was "successful," with 15% saying it was "very successful" and 39% calling it "somewhat successful."

The favorable survey results could encourage Trump to push ahead with his other policies and, perhaps, take an even harder line on trade and other issues with foreign countries. The North Korean nuclear crisis is very much intertwined with trade and is destabilizing global stock markets. 

Yet, despite these circumstances, investors see investment opportunities in the making.

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