Shane Oliver, AMP Capital Investors Ltd.’s Sydney-based head of investment strategy, comments on the implications for global stock markets after reports North and South Korea exchanged artillery fire.
North Korea fired “several” artillery shells into South Korea near the two nations’ western border, prompting a return of fire, the South’s Joint Chiefs of Staff said in a statement. The confrontation added to losses earlier today after Moody’s Investors Service warned of a downgrade of Ireland as the nation called an election and amid concern that China may intensify efforts to contain inflation.
“At this stage we’re waiting to see how things play out. There’s the risk of a knee-jerk reaction in markets. It’s coming at a bad time, with the European debt issue and also worries about ongoing tightening in China.
“Investors are already feeling pretty skittish, and that can result in an outsized reaction. It’s too early to assume it’ll turn into a full-scale war, and so may even end up providing a buying opportunity. Some investors will obviously panic and hit the sell button.”
“You’ve got to remember that tension often heats up between South and North Korea. It often flares up and then dies down again. History suggests the same thing will happen here, but you don’t really know for sure.”