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What Does Kim Jong-Un's Speech Hold For Safe Haven ETFs?

Zacks Equity Research
Updated
Texas Capital (TCBI) reported earnings 30 days ago. What's next for the stock? We take a look at earnings estimates for some clues.

North Korean premier Kim Jong-Un ushered in 2018 with a speech that rattled investors. He warned the United States and said that he has a nuclear button on his desk that might be used in case his country is threatened. The North Korean dictator also stated that he was open to talks with representatives of South Korea.  

Geopolitical Tensions

Kim used his speech to highlight his desire of reducing tensions with the other half of the Korean peninsula. “When it comes to North-South relations, we should lower the military tensions on the Korean Peninsula to create a peaceful environment,” Kim said. “Both the North and the South should make efforts.”

“We have always stated our willingness to talk with North Korea anytime and anywhere if that would help restore inter-Korean relations and lead to peace on the Korean Peninsula,” per a spokesman for the South Korean president.

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The North Korean leader also used his welcome address as a tool to warn the United States that it does not have any plans of scrapping its nuclear program. Instead, it wishes to expand the same. Earlier in November, North Korea launched a Hwasong-15 missile with improved technology that can put the entire United States within range, per Korean Central News Agency (KCNA). North Korea seems to be anything but willing to scrap its nuclear program, as it broke its two-month-long period of silence by testing a missile that reached an altitude of more than 4,000 kilometers (read: Safe Haven ETFs in Focus Amid Geopolitical Threats).

"The entire United States is within range of our nuclear weapons, a nuclear button is always on my desk. This is reality, not a threat," Kim stated in his speech. "This year, we should focus on mass-producing nuclear warheads and ballistic missiles for operational deployment. These weapons will be used only if our society is threatened," he added.

President Donald Trump did not respond to his North Korean counterpart’s comments. However, several analysts predict that this was an attempt to weaken the dialog between the United States and South Korea.

Let us discuss a few ETFs gaining investor attention on the rising geopolitical risks relating to North Korea.

CurrencyShares Japanese Yen Trust FXY

Japanese yen funds are the go-to investment vehicles in periods of rising risks. Although Japan’s proximity to North Korea creates doubts over its reliance as a safe haven currency, its significant foreign asset position makes it a good bet.

This ETF seeks to provide exposure to the Japanese yen. It has AUM of $106.5 million and charges a fee of 40 basis points a year. It has returned 2.9% last year . As such, FXY carries a Zacks ETF Rank #3 (Hold) with a Medium risk outlook (see all Currency ETFs here).

CurrencyShares Swiss Franc ETF FXF    

Another investment vehicle investors flock to during periods of rising risks is Swiss Franc funds. This ETF seeks to provide exposure to the Swiss franc. It has AUM of $150.1 million and charges a fee of 40 basis points a year. It has returned 3.9% last year. As such, FXF carries a Zacks ETF Rank #3 with a High risk outlook.

SPDR Gold Shares ETF GLD

Gold has been gaining on lower U.S. yields and weak dollar. Moreover, rising concerns relating to North Korea as well as Middle East might bring these investments in favor (read: Precious Metal ETFs in Focus).

GLD offers physical exposure to gold. It seeks to track the performance of the gold bullion and might turn out to be a cost-efficient way of gaining exposure to the commodity even after accounting for the fund’s expenses. It has AUM of $34.9 billion and charges a fee of 40 basis points a year. It has returned 12.1% last year. As such, GLD carries a Zacks ETF Rank #3 with a Medium risk outlook.

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CRYSHS-JAP YEN (FXY): ETF Research Reports
 
GOLD (LONDON P (GLD): ETF Research Reports
 
CRYSHS-SWISS FR (FXF): ETF Research Reports
 
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Zacks Investment Research
 
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