Over the past week Australian shares were up 1.8% while small company shares were up 3%. Shares in developed countries rose 0.1% with the US market up 0.6%. Shares in emerging markets were up 1.4%. The Australian dollar fell 0.8% to 78.43 US cents. The Australian 10 year bond yield fell to 2.85% while the US 10 year bond yield was unchanged at 2.87%. The oil price increased 3% to 63.55 US dollars per barrel.
On Sunday the Winter Olympics ended. The Winter Olympics seems like a collection of the strangest and most dangerous sports. From the peculiar sport of Curling, which involves scrubbing ice to alter the trajectory of a heavy granite stone, through to the appropriately named Skeleton, plummeting head-first down a steep and treacherous ice track on a small sled.
There was something else a little peculiar in the 2018 Winter Olympics – North and South Korea competed together under the Korean Unity flag. This display was grand and well-televised. But was it a meaningful indicator for the future of the two Koreas?
In the Winter Olympics of 1956, 1960 and 1964 German athletes from West and East Germany competed as the United Team of Germany. In 1989 the Berlin Wall came down and German re-unification began (see last week’s investment update). On the surface, the grand show of Korean unity might seem important. But the differences between the divided Korea of 2018 and the divided Germany of 1990 are stark.
What might be the drivers for Korean unification?
So, despite the common ground, it seems unlikely that the desire for personal freedom and better products could motivate mass protests, never mind a large scale breach of the demilitarised zone.
And what of the costs?
And what are the economic consequences?
So what should we make of the Winter Olympics?
The show of unity seems to be about politics and diplomatic manoeuvres. The South Korean President needs to deliver on his promise to engage with the North. North Korea’s leader Kim Jong-un is thought to be attempting to drive a wedge between the US and South Korea.
Unfortunately for the people of North Korea, a peaceful unification, like that which improved the lives of East Germans, seems distant. If Korean unification occurs then it will probably be the result of regime change in North Korea or a military coup. In the meantime, the people will suffer and the risk of military conflict with the US will persist.
Sean Anthonisz | Senior Quantitative Analyst
Past performance isn't necessarily an indicator of future performance.
Data sourced from Bloomberg, Olympic Games, The Economics of German Unification, Twenty-Five Years Later, The Economics of German unification after Twenty-five years: Lessons for Korea, NY Times, 2017 DPR Korea Needs and Priorities, Economist