The apparent assassination of Kim Jong-nam in the Kuala Lumpur international airport is just the latest example of the political strife and uncertainty sweeping Asia. South Korea's leader has stepped down amid an influence-peddling and bribery scandal, nuclear-capable North Korea keeps blowing missiles into the sky, and investors don't care.
I've typically written off North Korea's tantrums as nothing more than the attention seeking of a teenage child. But I'm beginning to take them a little more seriously, particularly with Donald Trump in office and other political uncertainties in my part of the world.
North Korea is center of attention now thanks to Kim's spectacular death -- the stuff of spy novels mashed up with Game of Thrones. He was my near-neighbor, spending most of his time in exile in Macau, an hour's ferry ride away from me across the Pearl River Delta.
He was, of course, the estranged half-brother of the current North Korean leader Kim Jong-un who, since he is younger, appeared to usurp his now-dead sibling on taking power. It helps that the younger Kim is the very image of his grandfather Kim Il-sung, North Korea's "supreme leader," the founder of the nation. He's now purging anyone he feels may be a threat, often purportedly in terrible ways.
Investors shook off news of Kim's death. The benchmark Kospi index rose 0.45% on Wednesday, their first chance to react, and was essentially flat on Thursday, closing down 0.1%. But should they be so blasé?
South Korean large-cap stocks have been some of the best performers in the world this year. The MSCI Korea Index is up 9.4% in 2017. It covers 107 large- and mid-cap stocks, and about 85% of the Korean equity universe.
Investors can play that index via the iShares MSCI South Korea Capped ETF (EWY) , the largest ETF dedicated to Korea, with $2.8 billion under management. There's also a currency-hedged version (HEWY) , which is what I would recommend for U.S. investors. Other hedged options to consider include the Deutsche X-trackers MSCI South Korea Hedged Equity ETF (DBKO) and the WisdomTree Korea Hedged Equity Fund (DXKW) .
But the rest of the companies in Korea -- the 15% of small caps not covered by the MSCI index -- have performed terribly. As a result, the Kospi, which tracks all shares listed in Seoul, had gained just 2.8% as of Thursday's close.
Besides South Korea's surly neighbor -- if not a teenager, others compare North Korea to a "crazy uncle," best left undiscussed in the attic -- investors also have to contend with major problems involving the way Korean companies are run. Those issues are coming to the fore again.
Thanks to repeated infractions over the years, Seoul shares trade at a "Korea discount," equity valuations depressed by corporate-governance failures. The families that run the chaebols -- the sprawling conglomerates that dominate the economy -- often appear to consider them their own private purview, and have worryingly close ties to the country's political class.
As details about Kim's death emerge, and with two female suspects now in custody, the link between business and politics is also under renewed scrutiny. The authorities have issued an arrest warrant for Samsung Group President Jay Y. Lee and another top executive in connection with a bribery scandal that has taken down the country's top politician. The case has rocked corporate Korea to its core, as I explained last month, Samsung being Korea's best-known brand.
What's more, South Korean President Park Geun-hye resigned at the end of November, and was impeached soon after that. Investigators are looking into whether she aided a close friend who is now accused of extorting $69 million in "donations" from 53 of Korea's biggest companies, in exchange for political favor.
Lee, Park and others involved have denied any wrongdoing.
With both internal and cross-border tension rising, investors should have pause for thought. For now, though, Korean markets are weathering any storm.
South Korea's economy will likely grow at 2.9% this year, one basis point better than 2016 and a full percentage point better than Asian peers such as Hong Kong, Singapore and Taiwan, according to Commerzbank. An election around mid-year is likely to remove some of the political uncertainty.
It's corporate scandals that should cause more misgivings. Shares in Samsung Electronics (SSNLF) , the company's flagship listed company, are down 5% since Jan. 26, as the Lee scandal escalated.
And it is the currency that will see the most impact from tension between the two Koreas. After the ballistic-missile launch on Feb. 12, as Trump was meeting with Japanese Prime Minister Shinzo Abe, it's likely there will be further escalation from North Korea, according to Nomura's analysts.
That's because the United States and South Korea are due soon to hold their annual joint military exercises, which usually elicits a response. Yesterday was also the birthday of Kim Il-sung, which stokes nationalistic fervor.
The Korean won has weakened slightly on both of the past couple of days, and Finance Minister Yoo Il-ho says his ministry is closely monitoring the won's current volatility, especially the won-yen cross rate. For now, currency traders appear to be paying more heed to Janet Yellen's testimony and the likelihood of U.S. interest-rate rises than any events involving the Korean peninsula.
But higher tensions and further launches would undoubtedly dent Korean consumer confidence. South Korea, as well as Taiwan, are both now more leveraged to domestic consumers than economies in Southeast Asia, especially Singapore, which are tied to the global economic cycle.
There's always the chance that the northern posturing will result in a mistake. In November 2010, artillery shelling from the north killed two soldiers and injured another 17 people, including three civilians. That prompted the threat of "enormous retaliation" from the then-South Korean president Lee Myung-bak.
So watch this space, particularly with Trump in charge. His response to North Korea's aggression has so far been muted. But the chance of "hot" conflict in Asia -- a mistake is more likely than outright aggression -- is high.
Could there be more chaos elsewhere in Asia? We're a region used to political uncertainty, but almost every nation is currently tainted.
Taiwan is back in play as a bargaining chip with China, which holds a key leadership summit later this year. Thailand has a new king that few people like. Hong Kong will hold undemocratic elections next month that make no one happy. The Philippines has Rodrigo "Duterte Harry" in charge, a man who at times says he personally led death squads and killed people. Malaysia's prime minister is ensnared in the 1MDB sovereign-fund scandal. And Indonesia's president is under increasing pressure from hard-core Islamists.
With such a long list of potential conflicts, Asia's future is even more uncertain than usual.