"There aren’t any details,” said Kiyoshi Ishigane, chief strategist at Mitsubishi UFJ Kokusai Asset Management Co. in Tokyo.
"They’re saying they’ll try. But we don’t know if this will actually materialize."
Markets across Asia barely reacted after U.S. President Donald Trump and Kim signed an agreement Tuesday that said that Trump would provide unspecific security guarantees to Kim in exchange for the North Korean leader’s pledge to work toward easing tensions between the two countries.
And even as Trump shared some added details at a press briefing, markets were unfazed. “It’s long on talk and relatively short on action,” said Clive McDonnell, the Singapore-based head of emerging market equity strategy at Standard Chartered Bank. “We’re still in a little bit of wait and see mode in terms of detail, but I think the outcome is pretty positive in my mind.”
Japan’s Topix index closed 0.3 percent higher, while South Korea’s Kospi index was little changed. The South Korean won rose 0.2 percent and the greenback also gained slightly. U.S. stock-index futures fluctuated, swinging between gains and losses as European trading started Tuesday.
Framed Like a Win
“Markets are slightly disappointed that there were not many specific details to latch on to,”’ said Damien Loh, chief investment officer of Singapore-based currency artificial intelligence fund Ensemble Capital.
“It was framed to look like a ‘win’ for both sides, so this means we will have to continue to see how negotiations continue as both sides come closer to a mutually acceptable definition of the thorny term ‘denuclearization.’”
“The fact that the Kim-Trump meeting even carried on as long as it did, with both leaders engaging each other in conciliatory tones, was a positive outcome,” said Eli Lee, head of investment strategy at Bank of Singapore.
“In terms of long-term impact, vague pledges of complete denuclearization that will occur very quickly is unlikely to be very convincing for markets. More details will need to emerge.”
The conclusion of the meeting between the leaders of the U.S. and North Korea hasn’t elicited any reaction from the dollar or the yen as markets realize this is only the first step in a long process toward achieving peace, says Stephen Innes, head of trading for Asia-Pacific at Oanda Corp. in Singapore.
Jefferies chief global equity strategist Sean Darby downgraded South Korea to “modestly bullish” from ”bullish” after today’s summit citing slowing economy, narrowing profits and the tightening of monetary policy. “S. Korean President Moon will need to turn his attention to the domestic economy where the disinflation boom is evaporating fast,” he added.
Markets are struggling to find a reason to sustainably price in more risk-on as they want to see tangible outcomes, according to Vishnu Varathan, head of economics and macro strategy at Mizuho Bank Ltd in Singapore.
“I think there’s probably bigger fish to fry this week with the ECB and the Fed in terms of direct takeaways because we’ll have clear action points come out of both those meetings,” Standard Chartered’s McDonnell said.
“You’ve got to look past the fluff,” said Nick Twidale, chief operating officer of Rakuten Securities’ Australian unit. “The markets are going to get straight back into almost the real game, which is fundamental data. Possibly two or three hours into the London session we may have forgotten about it.”
While, “the path to prosperity by trading nuke ambitions to curb sanctions is too big for North Korea to ignore,” Oanda Corp.’s Innes is standing pat. “I am still not adding regional risk until the Fed and ECB clears,” he said.
It looks like many others in the markets took the same view.
“It’s a wonderful agreement to land on the first shot. But the market isn’t reacting very much. It seems like people are, again, skeptical," said Soichiro Tsutsumi, a trader with eWarrant Japan Securities K.K. in Tokyo.