N. Korea May Adopt China-Style Economic Reforms, Mobius Says

December 22, 2011, 9:54 PM EST By Saeromi Shin

(Adds comments from Mobius in fourth paragraph, S&P’s ratings outlook in sixth paragraph. See {EXT2 } for more on North Korea and Kim Jong Il’s death.)

Dec. 23 (Bloomberg) -- North Korea’s leadership transition will probably be smooth and its new rulers may be willing to embrace economic reforms similar to those in China, said Franklin Templeton Investments’ Mark Mobius.

A regime change in the communist nation is unlikely to have “immediate substantive impact” on other North Asian financial markets, Mobius, executive chairman of Templeton Emerging Markets Group, wrote in his blog. The company is still holding on to South Korean equities, he said in an interview with Bloomberg Television today.

South Korea’s Kospi slumped 3.4 percent on Dec. 19 after the death of North Korean leader Kim Jong Il sparked concerns over succession in the totalitarian nation. The gauge has risen 5.1 percent since then. The focus now is on his son Kim Jong Un, who is thought to be in his late 20s and was named to senior military and party posts last year.

“In some ways, the break from the past could be a good signal so I’m more optimistic than pessimistic,” Mobius said in the TV interview. “I think the transition is going to be rather smooth.”

Franklin maintained its holdings of South Korean equities this week, Mobius said.

S&P Outlook

Standard & Poor’s said the ratings outlook for South Korea is stable and reflects expectations that political risk in North Korea won’t deteriorate markedly from current levels during period of leadership transition.

North Korea’s state media called for citizens to “loyally follow” Kim Jong Un, according to a Dec. 19 statement. The country will become more open under the new leader compared with the rule of his late father, according to almost half of South Koreans who responded to an opinion poll.

South Korean President Lee Myung Bak today lifted an emergency duty decree for all government workers except those working on diplomacy, security and public safety, said his spokesman, Choe Guem Nak.

--Editors: Darren Boey, Brett Miller

To contact the reporter on this story: Saeromi Shin in Seoul at sshin15@bloomberg.net;

To contact the editor responsible for this story: Darren Boey at dboey@bloomberg.net

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