Opinion | Why North Korea is set to become the next big thing for investors

Will North Korea become the next big thing for investors now that the Donald Trump and Kim Jong-un summit has ended with handshakes and a “walkabout” (rather than a walkout) by the two leaders?

The question is not premature, even if denuclearisation of the Korean peninsula is some way off. The general verdict on the Singapore summit is that there is still a long way to go before we can say Trump’s “art of the deal” has paid off. But the economic and financial implications of the summit are more immediate.

Save a reversal of the Singapore agreement, Pyongyang and Seoul will emphasise economic and military matters. Kim has emphasised his desire to modernise North Korea’s economy, but he cannot afford to do so alone.

Nor will South Korea be able to pick up the tab in the same way West Germany did for East Germany when the two halves of the divided nation were reunified. Outside aid and investment – a great deal of it – will be needed from governments, multilateral agencies and private investors.

Besides South Korea, this will come from China, Japan and maybe the United States and Europe so far as official aid is concerned. Multilateral aid will flow in time. But the more intriguing question is how will private investment flow into the hermit kingdom?

Fund managers, who always like to be ahead of the game, will initially approach investment in North Korea via an indirect route, i.e. by targeting stocks of companies that are likely to be doing more business with North Korea as the denuclearisation process begins to unwind.