US-North Korea summit: Concrete steps on transparency in denuclearisation needs a close watch

Highlights: - Second summit of US and North Korea has been cut short on the second day - While denuclearisation remains on cards, transparency and sanctions are the key issue - On risk events elsewhere, Brexit assumes importance – key date March 12  -------------------------------------------------

While the India-Pakistan border tensions have emerged as key geo-political risk, investors should not take their eyes off another one on the other side of Asia – denuclearisation of North Korea.

Second summit of the US President Donald Trump and North Korean head Kim Jong Un has been cut short on day two of the summit. In interactions to mediapersons earlier, Kim has expressed his commitment to denuclearisation. However, a time bound plan doesn’t appear to be in place. This is also corroborated by Trump’s statement that "speed is not that important to me".

Further, there were an earlier indication that North Korea would allow a US office in Pyongyang, which may be instrumental in monitoring and following up on its commitments. However, as the meet has been cut short, there appears to disappointment on a time-bound denuclearisation and transparency with respect to the same. Further, Trump in a short media briefing updated that N.Korea was looking for a complete removal of sanctions which led to no agreement. Asian markets, at the time of writing have turned negative and KOSPI is trading 1.8 percent lower.

To provide context, progress includes freeze on missile tests by North Korea and partial dismantlement of a nuclear test site. Trump had suspended joint military exercise with South Korea. As a follow-up, there has been multiple rounds of talks between senior representatives. Major issues of engagement appears to revolve around how to ensure transparency and irreversible process of denuclearisation. Further, North Korea expects easing of sanctions.

Talking about other global risk events, it may not be out of place to mention that Brexit deal continues to a major an event risk, given that it is running through the deadline wall (March 29). UK’s premier Theresa May has signalled that if her March 12 deal is voted down, then she would ask for a two-month extension. As a result, the pound has appreciated in the last couple of days. However, this option doesn’t appears to be easy as Spain and France have indicated that mere request for extension would not be entertained unless accompanied with a newer proposal.

Read: Key risk to monitor

The global equity markets trajectory continues to be dictated by risk events. Back home,  border tensions are keeping the risk premium high in the Indian market.