SINGAPORE (Aug 18): The threat that North Korea poses to the rest of the world seems likely to colour market sentiment for some time.

This could potentially dampen confidence in a broad global economic recovery and reshape views on the prospects of some geographical markets, industries and stocks.

For one, the whole North Asian region has become a significant part of the global economy over the last 20 years. So, any military conflict in the region would have a significant impact on trade and global supply chains.

Meanwhile, Kim Jong-un, the current supreme leader of the North Korea, has been claiming that the country’s nuclear and ballistic missiles are within striking distance of the US.

This puts Kim in a stronger position than ever to extract concessions from major global powers and ensure the survival of his regime.

Then, there is US President Donald Trump, who not only has a penchant for colourful rhetoric that could inflame a delicate situation but who also does not appear to have firm views on the role of the US in Asia.

In some ways, that makes the US a greater risk than North Korea amid the current tension in the region. In fact, it was only after Trump responded aggressively to news of North Korea’s missile tests earlier this month that global markets began to tremble.

Since then, both the US and North Korea have stepped back from the brink. This past week, top US officials stated that military action was not imminent, and North Korea’s Kim said he would wait to see how the US behaved before carrying out his Guam threat. Nevertheless, the situation remains tense.

For the moment, nobody seems to be expecting a full-scale nuclear engagement, but any escalation of military conflict in the region is likely to trigger a selloff in risk assets such as equities and a surge of buying interest in safe-haven assets.

So, what are investors to do?

Rajiv Biswas, Asia-Pacific chief economist at IHS Markit, advises investors to seek to protect their wealth by maintaining a portfolio that includes some safe-haven assets, including gold, Swiss francs, US dollars and US Treasury bonds for the longer term.

But what are the longer-term implications for Asia? Or Singapore for the matter? And what are some safe haven assets investors can invest in?

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