How Investors Are Reacting to the Trump-Kim Summit Collapse

(Bloomberg) -- Stephen Innes has been buying gold since the news broke that U.S. President Donald Trump had canceled his planned summit with North Korean leader Kim Jong Un.

But that aside, he doesn’t seem too bothered.

“It’s a bump in the road,” Innes, the head of trading at Oanda Corp. in Singapore, said in a phone interview. “The road to prosperity offered to North Korea by the U.S., South Korea and Japan is just too tempting for North Korea to pass up. The situation will get ironed out, just not as quickly as the market may have wanted.”

North Korea said it was surprised by Trump’s decision, and that the country remains willing to meet at any time. In a statement Friday by state-run KCNA that cited Vice Foreign Minister Kim Kye Gwan, North Korea vowed to continue to pursue peace and signaled it would give Washington more time to reconsider talks.

Market reaction was muted in Asian trading Friday, with Japan’s benchmark Topix index and a regional equity gauge trading slightly lower. U.S. stocks dropped after Trump’s announcement, before paring losses to close down 0.2 percent on Thursday.

“The low-key risk-off move was about par for the course,” Innes said. A military conflict is “highly unlikely,” he said.

Here are some other investor comments.

Brinksmanship

“It’s a shame that it has been canceled as both administrations sit on the verge of something great,” said James Soutter, head of global equities at K2 Asset Management Ltd. in Melbourne. “That said, the process isn’t over, and one has to try to figure out how much brinksmanship is at play.”

Soutter said he expected selling of South Korean stocks, and that he’d look to buy them if the market overreacted. The benchmark Kospi index slid 0.3 percent as of 10:34 a.m. local time.

As for what he’s watching for next, Soutter said it’s “who will flinch first.”

“Both are playing the man, not the ball, and in such as testing each others’ limits,” Soutter said. “Trump has just shown that he won’t fold. It’s now back in Kim’s corner.”

It’s “part of the posturing and chess game,” said Kay Van-Petersen, a Singapore-based global macro strategist with Saxo Capital Markets Pte. “The summit will eventually happen -- just a question of time and date. No U.S. president is going to pass on the legacy trade of a lifetime.”

China Link

“North Korea’s remarks got tougher as the ties between China and North Korea strengthened,” said Hideyuki Ishiguro, a senior strategist at Daiwa Securities Co. in Tokyo. “So, some people in the market were skeptical about the feasibility of the U.S.-North Korea summit. Still, Trump left the door open to a summit, so this isn’t a complete break-off.”

Not Over

“I don’t think it’s all over yet,” said Heo Pil Seok, chief executive officer of Midas International Asset Management Ltd. in Seoul. “Trump seems to be testing the water by declaring the cancellation. The level of tensions on the Korean peninsula depends on the response from North Korea.”

Chua Hak Bin, a senior economist at Maybank Kim Eng Research Pte in Singapore, agreed.

“The cancellation is a major setback,” he said. “But both the U.S. and North Korea are still talking and it wouldn’t be a surprise if the Singapore summit still takes place at a later date."

Like Innes, Chua isn’t too fussed about the news.

“Investors are becoming accustomed to the Trump volatility and decision flip-flops,” he said. “Markets should not overreact to this news.”

“The market is waking up to the fact that the historic summit between the U.S. and North Korea will not play out like a Hollywood blockbuster, but a long-running Korean drama series,” said Eli Lee, head of investment strategy at Bank of Singapore Ltd. “For now, both sides have not closed the door on an eventual meeting -- I think that is key.”

No Big Deal

“This is no big deal,” said Hao Hong, chief strategist at Bocom International Holdings. “This is all within expectation. Come on, who had expected that they were really going to meet?”

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