How to Play the Korea Conflict

|
 |  Includes: CHIE, CHII, CHIM, CHIQ, CHIX, CHXX, CQQQ, DGL, DGP, DGZ, DZZ, ECNS, EWY, FCHI, FXI, FXP, GDX, GDXJ, GLD, GLDX, GLL, GXC, HAO, IAU, NLR, NUCL, OIL, PEK, PGJ, PKN, PSAU, QQQC, SGOL, SKOR-OLD, SPGH, TAO, UBG, UGL, URA, XPP, YANG, YAO, YINN, YXI
by: Intelligent Speculator

If the North commits any additional provocations against the South, we will make sure that it pays a dear price without fail – South Korea President Lee Myung-bak

If you have been living on another planet, I can tell you right now that things are spinning out of control in the Korean peninsula since last week’s breakout. You can read more detailed summaries on websites like the New York Times but one thing that is easy to find out is that there is a lot of tension right now as the US and South Korea have initiated more preparation drills… preparing for what? A possible war with North Korea. Obviously, there are a lot of things to consider when thinking about what a military conflict between these countries would mean. It is a very delicate situation for quite a few reasons:

  • North Korea has one of the largest militaries in the world
  • It is within striking distance of Seoul and other huge Korean cities
  • North Korea has some nuclear capabilities although it’s unclear how much
  • The US has an alliance with South Korea and will be heavily involved if things derail
  • China is very much involved for many different reasons (relationship with North Korea, physical proximity, growing world power, etc.)
  • Korea is one of the more important economies in the world

How bad could things get? Very bad. This is serious and unfortunately, it’s impossible to assume that North Korea’s leader Kim Jong Il is smart enough to avoid letting this conflict go too far.

Here are some of the investments that you should consider using

South Korea ETFs

No doubt, the South Korean ETFs will be very volatile as the crisis goes on and there are certainly opportunities to do well. Just take a look at the chart from the past few days:

Ticker Name Market Cap Price Return YTD Fees Dividend Yield
EWY iShares MSCI South Korea Index Fund $3,735,456,000.00 $53.70 12.963 0.61 0.72
SKOR-OLD IQ South Korea Small Cap ETF $6,580,000.00 $26.45 N/A 0.79 0
Click to enlarge


Unfortunately, there are no ETFs on the South Korean Won at the moment as that could have been another very interesting play on the crisis.

Nuclear Energy ETFs

It’s unclear how advanced North Korea’s capabilities are but that they have been working on nuclear technology for over a decade now and if ever this conflict did go nuclear, it would have profound impacts on the global landscape.

Ticker Name Market Cap Price Return YTD Fees Dividend Yield
NLR Market Vectors - Nuclear Energy ETF $233,816,500.00 $24.78 9.709 0.62 1.71
URA Global X Uranium ETF $74,451,000.00 $19.38 N/A 0.69 0
PKN PowerShares Global Nuclear Energy Portfolio $33,983,000.00 $20.18 8.439 0.75 2.58
NUCL iShares S&P Global Nuclear Energy Index Fund $18,139,440.00 $41.26 0.685 0.48 2.11
Click to enlarge

China ETFs

China has been trying to establish itself as a world leader and having a crisis next to home is a threat. There is no doubt that China will want to have a major say on this crisis and if it ever exploded, it would have consequences on China and on its place in the world.

Ticker Name Market Cap Price Return YTD Fees Dividend Yield
FXI iShares FTSE/Xinhua China 25 Index Fund $8,224,849,000.00 $43.84 3.352 0.72 1.57
GXC SPDR S&P China ETF $764,378,000.00 $77.96 8.123 0.59 1.07
HAO Guggenheim China Small Cap ETF $493,971,500.00 $31.22 17.509 0.7 0.1
PGJ Powershares Golden Dragon Halter USX China Portfolio $456,633,000.00 $27.10 12.349 0.7 0.71
FXP ProShares UltraShort FTSE/Xinhua China 25 $206,419,600.00 $29.71 -27.199 0.95 0
CHIQ Global X China Consumer ETF $183,743,000.00 $19.41 17.818 0.65 0
YAO Guggenheim China All-Cap ETF $85,963,000.00 $27.89 9.358 0.7 0
CHIX Global X China Financials ETF $67,070,000.00 $14.20 -1.711 0.65 0
TAO Guggenheim China Real Estate ETF $65,822,400.00 $19.77 7.749 0.65 2.91
CHIM Global X China Materials ETF $57,196,000.00 $14.67 N/A 0.65 0
FCHI iShares FTSE China HK Listed Index Fund $57,002,000.00 $52.31 6.749 0.72 1.3
CZM Direxion Daily China 3X Bull Shares $55,848,050.00 $47.41 27.521 0.95 0.3
XPP ProShares Ultra FTSE/Xinhua China 25 $36,860,070.00 $75.25 3.246 0.95 0
CQQQ Guggenheim China Technology ETF $35,195,500.00 $28.36 8.996 0.7 0
PEK Market Vectors China ETF $27,126,000.00 $45.70 N/A 0.72 0
ECNS iShares MSCI China Small Cap Index Fund $19,012,000.00 $54.82 N/A 0.65 0
CHXX Emerging Global Shares INDXX China Infrastructure Index Fund $14,357,000.00 $20.77 N/A 0.85 0
CHII Global X China Industrials ETF $12,480,000.00 $16.85 7.24 0.65 0
CZI Direxion Daily China 3X Bear Shares $11,817,020.00 $17.80 -57.319 0.95 0
CHIB Global X China Technology ETF $5,083,500.00 $16.95 11.261 0.65 0
CHIE Global X China Energy ETF $4,569,000.00 $15.41 2.001 0.65 0
YXI ProShares Short FTSE/Xinhua China 25 $4,339,043.00 $42.90 N/A 0.95 0
Click to enlarge

Gold ETFs

We have been discussing gold over and over in recent weeks and months but that is because it is a hedge for inflation and for uncertainty and both are scaring investors around the world at the moment. Chances are good that an escalation of a conflict in the Korean peninsula would create a spike in the price of gold. Would it be enough to bring gold to $3000?

Ticker Name Market Cap Price Return YTD Fees Dividend Yield
GLD SPDR Gold Shares $56,462,040,000.00 $133.51 24.042 0.4 0
GDX Market Vectors - Gold Miners ETF $7,349,382,000.00 $58.87 26.834 0.53 0.19
IAU iShares Gold Trust $4,704,199,000.00 $13.36 23.778 0.25 0
GDXJ Market Vectors Junior Gold Miners ETF $1,963,440,000.00 $39.38 51.127 0.59 0
SGOL ETFS Gold Trust $1,075,585,000.00 $136.13 23.773 0.39 0
OIL iPath Goldman Sachs Crude Oil Total Return Index ETN $605,712,300.00 $24.12 -8.887 0.75 0
DGP PowerShares DB Gold Double Long ETN $517,401,300.00 $39.84 48.979 0.75 0
PGJ Powershares Golden Dragon Halter USX China Portfolio $456,633,000.00 $27.10 12.349 0.7 0.71
DGL PowerShares DB Gold Fund $319,177,900.00 $48.37 22.667 0.75 0
UGL ProShares Ultra Gold $236,952,900.00 $65.89 45.859 0.95 0
DZZ PowerShares DB Gold Double Short ETN $103,367,500.00 $8.65 -37.66 0.75 0
GLL ProShares UltraShort Gold $83,183,400.00 $30.32 -40.676 0.95 0
PSAU PowerShares Global Gold and Precious Metals Portfolio $59,318,750.00 $47.86 25.386 0.75 0.19
DGZ PowerShares DB Gold Short ETN $29,906,000.00 $15.75 -20.641 0.75 0
SPGH UBS E-TRACS S&P 500 Gold Hedged ETN $13,854,000.00 $34.64 N/A N/A 0
GLDX Global X Gold Explorers ETF $13,448,080.00 $17.20 N/A 0.65 0
UBG E-TRACS UBS Bloomberg CMCI Gold ETN $5,905,600.00 $36.91 22.21 0.3 0
Click to enlarge