By Kim Yoo-chul
One result from the summit between the two Koreas is the de-escalation of tension on the peninsula that will help remove the “Korea discount” on the stock market, Cheong Wa Dae said in a statement Friday.
“North Korea has not tested nuclear weapons or launched any missiles so far this year. Also, measures have been taken aimed at ending war risks on the Korean Peninsula, including the North dismantling key nuclear test facilities. South Korea will see progress in addressing the Korea Discount issue,” it said.
The statement marked the 100th day since the two Koreas announced the “Panmunjeom Declaration,” co-signed by President Moon Jae-in and North Korean leader Kim Jong-un. The declaration called for denuclearization and peace on the peninsula.
In the statement, the presidential office added the two Koreas are on track to build “mutual trust” thanks to agreements at generals' talks to reduce the number of guard posts operated by each in the heavily-fortified Demilitarized Zone (DMZ) and the Joint Security Area, and to eventually demilitarize the DMZ.
“Last year, the risks of war on the Korean Peninsula were higher because of nuclear weapons tests and missile launches by North Korea, however, the Koreas decided to seek peace and to push for denuclearization throughout dialogue with the United States. The risk of war has been completely eliminated,” Cheong Wa Dae said.
The military threat from North Korea has long been seen as a major factor weighing down South Korea's stocks, heightening the Korea Discount that stemmed from concerns about corporate governance.
Hopes are growing among foreign investors that the summit between North Korea and South Korea and Kim Jong-un's meeting with the U.S. President Donald Trump in Singapore might not only bring peace to the peninsula but also cut the perennial discount for South Korean stocks.
S&P Global Ratings said if the joint statement is followed through with, this will allow the normalization of the North's international relations and reduce the structural risks to South Korea's sovereign credit profile. But because the statement lacked specifics on what denuclearization means and how it would be achieved, any peace process is likely to be lengthy and prone to breakdowns.
Cheong Wa Dae said the government will step up the country's efforts to guarantee peace, prosperity and the normalization of relations with North Korea based on a consensus among South Koreans.
“Peace is normal in people's daily lives as the declaration doesn't mean a simple recovery in inter-Korean relations, but does mean a new beginning. Based on mutual trust, President Moon can easily meet and talk with the North Korean leader Kim on key issues,” the statement concluded.