3 Ways To Profit From The New North Korea
Love him or hate him, Trump has shown his formidable negotiation skills on the world stage. Keeping the press and his opponents off balance with an anti-aircraft, artillery fire-style tweet storm, our Commander-in-Chief has made positive inroads where past world leaders have failed miserably.
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As unconventional — and, frankly, entertaining — as U.S. global relations have become, nothing beats the latest U.S. win for long-term peace and prosperity. Savvy speculators are already scrambling to capture profits based on the potential results of Trump’s diplomacy.
#-ad_banner-#I am talking about the possible de-nuclearization and economic opening of North Korea. The on-again, off-again United States-North Korean summit could not have gone more positive — not to mention the fact that even fiction writers would struggle to create such a scenario.
The hardened young dictator Kim Jong Un was softened to Western influence by his friend, basketball star, and overall bad boy Dennis Rodman. It’s nearly insane how it took the combination of edgy Rodman and a controversial billionaire, reality TV superstar president to pierce the once impenetrable North Korean iron curtain.
The South Korean government has already allocated $900 million to fund economic projects between South and North Korea. South Korean Deputy Prime Minister Kim Dong-yeon has stated that his country is actively reviewing a variety of possibilities for commercial partnering.
Now that the unimaginable has happened with Kim cooperating and likely to open up the sheltered nation, how can investors best position themselves to capture the possible profits?
Here are three ways to profit from the new North Korea:
1. Real Estate
Trump tipped his hand in regard to real estate opportunities available in the soon-to-be-opened nation. With a mind focused on development, no one should be surprised by the way our president thinks. Trump stated, “They (North Korea) have great beaches, you see that whenever they are exploding their cannons into the ocean. I said, boy, look at that view. Wouldn’t that make a great condo?”
Real estate prices are already spiking along both the Chinese-North Korean and South Korean-North Korean borders as investors prepare for North Korea to open. Reuters recently reported that land sales in Paju, a city near the Korean Demilitarized Zone, more than doubled in March to 4,600 from the previous month.
Risk-embracing investors can purchase international hotel stocks like Hilton Hotels (NYSE: HLT) and Marriott (NYSE: MAR) to position themselves for the likely building boom along the coastlines.
2. Raw Material Extraction And Infrastructure Build-Out
North Korea is awash with raw materials that will be harvested once its economy kicks into gear. Bloomberg estimates that North Korea’s natural resources may be worth trillions of dollars.
Copper, silver, iron ore, zinc, magnesite, oil, gold and a variety of rare earth materials are all found in abundance in North Korea. These natural resources need to be extracted from the ground via heavy machinery. Companies like Caterpillar (NYSE: CAT) stand to profit from this newly available resource stash.
Another, albeit more speculative, way to profit from the possible raw material bonanza is to short natural resources in the long term.
The fundamental laws of supply and demand may result in the price of these materials dropping as the worldwide supply increases. There is no way that the Korean nation could absorb the new supply if it is opened to global trade. Therefore, expect resource prices to move lower in the long term.
At the same time, heavy equipment makers like Caterpillar stand to profit from the infrastructure build-out of North Korea.
Sungmee Park, an analyst at Citi, told the Financial Times: “We expect the construction sector would immediately benefit from an urgent need for power plants and infrastructure in North Korea if the economy opens. In the longer term we also expect opportunities in the housing, commercial buildings and plants for the 25m population of North Korea.”
3. Hyundai Group (OTC: HYMTF)
Traded in the United States on the OTC market, Hyundai is already making plans to enter North Korea.
The South Korean conglomerate Hyundai Group was split from Hyundai Motors in 2000 and has a history of working with North Korea. Most notable North Korean projects include the massive Kaesong industrial complex and a mountain resort.
Based on the vast ranging businesses and historical precedent with North Korea, the Hyundai Group is the best-positioned company to benefit from the new North Korea.
Risks To Consider: While the rewards can be spectacular, speculating on geopolitical outcomes is exceedingly risky. Should you decide to take this risk, it is best to invest in companies, such as the ones above, that are geographically diversified and not one region specialists.
Action To Take: Consider investing in large companies that may profit from the positive changes on the Korean peninsula.
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