Following the historic decision of North Korea and South Korea to denuclearize the peninsula also end the near 70-year long war, Ajay Bodke of Prabhudas Lilladher says that India’s largest automaker Maruti Suzuki as a major beneficiary.
Following the historic decision of North Korea and South Korea to denuclearize the peninsula also end the near 70-year long war, Ajay Bodke of Prabhudas Lilladher says that India’s largest automaker Maruti Suzuki as a major beneficiary. Taking stock of the development, Ajay Bodke, CEO & Chief Portfolio Manager PMS Prabhudas Lilladher told FE Online, “ The just concluded historic summit between the Presidents of two Koreas has rekindled global hopes of a lasting détente. If a clearly agreed path between the two sides leads to a signing of an armistice and eventual denuclearization of the Korean peninsula, it has the potential to increase risk appetite and will be positive for risk assets.”
According to the expert, during times of heightened geo-political and security tensions, global investors tend to rush to buy safe-haven assets like JPY leading to strengthening of JPY and creating headwinds for an export-dependent economy like Japan. “A positive fallout of the rapprochement in the Korean Peninsula and resulting ‘Peace Dividend’ can lead to weakening of Japanese Yen (JYP) as global risk appetite increases,” Ajay Bodke observed. Accordingly, he sees importers of the the Japanese currency JPY (Yen) as major beneficiaries.
“Indian companies like Maruti Suzuki, that have large imports or royalty payments denominated in JPY as well those who have borrowed in JPY will benefit from such an eventual weakening. Conversely, exporters to Japan (for instance some Indian pharmaceutical & IT companies) will be negatively impacted with such a weakening of JPY,”-Ajay Bodke said in a note.
Notably the two countries North Korea and South Korea had signed an armistice when the fighting ended way back in in 1953, have now agreed to pursue a proper peace agreement tied to the “common goal of realizing, through complete denuclearization, a nuclear-free Korean Peninsula.”