Most Popular
1. Banking Crisis is Stocks Bull Market Buying Opportunity - Nadeem_Walayat
2.The Crypto Signal for the Precious Metals Market - P_Radomski_CFA
3. One Possible Outcome to a New World Order - Raymond_Matison
4.Nvidia Blow Off Top - Flying High like the Phoenix too Close to the Sun - Nadeem_Walayat
5. Apple AAPL Stock Trend and Earnings Analysis - Nadeem_Walayat
6.AI, Stocks, and Gold Stocks – Connected After All - P_Radomski_CFA
7.Stock Market CHEAT SHEET - - Nadeem_Walayat
8.US Debt Ceiling Crisis Smoke and Mirrors Circus - Nadeem_Walayat
9.Silver Price May Explode - Avi_Gilburt
10.More US Banks Could Collapse -- A Lot More- EWI
Last 7 days
Stock Market Volatility (VIX) - 25th Mar 24
Stock Market Investor Sentiment - 25th Mar 24
The Federal Reserve Didn't Do Anything But It Had Plenty to Say - 25th Mar 24
Stock Market Breadth - 24th Mar 24
Stock Market Margin Debt Indicator - 24th Mar 24
It’s Easy to Scream Stocks Bubble! - 24th Mar 24
Stocks: What to Make of All This Insider Selling- 24th Mar 24
Money Supply Continues To Fall, Economy Worsens – Investors Don’t Care - 24th Mar 24
Get an Edge in the Crypto Market with Order Flow - 24th Mar 24
US Presidential Election Cycle and Recessions - 18th Mar 24
US Recession Already Happened in 2022! - 18th Mar 24
AI can now remember everything you say - 18th Mar 24
Bitcoin Crypto Mania 2024 - MicroStrategy MSTR Blow off Top! - 14th Mar 24
Bitcoin Gravy Train Trend Forecast 2024 - 11th Mar 24
Gold and the Long-Term Inflation Cycle - 11th Mar 24
Fed’s Next Intertest Rate Move might not align with popular consensus - 11th Mar 24
Two Reasons The Fed Manipulates Interest Rates - 11th Mar 24
US Dollar Trend 2024 - 9th Mar 2024
The Bond Trade and Interest Rates - 9th Mar 2024
Investors Don’t Believe the Gold Rally, Still Prefer General Stocks - 9th Mar 2024
Paper Gold Vs. Real Gold: It's Important to Know the Difference - 9th Mar 2024
Stocks: What This "Record Extreme" Indicator May Be Signaling - 9th Mar 2024
My 3 Favorite Trade Setups - Elliott Wave Course - 9th Mar 2024
Bitcoin Crypto Bubble Mania! - 4th Mar 2024
US Interest Rates - When WIll the Fed Pivot - 1st Mar 2024
S&P Stock Market Real Earnings Yield - 29th Feb 2024
US Unemployment is a Fake Statistic - 29th Feb 2024
U.S. financial market’s “Weimar phase” impact to your fiat and digital assets - 29th Feb 2024
What a Breakdown in Silver Mining Stocks! What an Opportunity! - 29th Feb 2024
Why AI will Soon become SA - Synthetic Intelligence - The Machine Learning Megatrend - 29th Feb 2024
Keep Calm and Carry on Buying Quantum AI Tech Stocks - 19th Feb 24

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Investing in South Korea Today Like Buying U.S. in 1990s, Brewing Tech Boom

Companies / Tech Stocks Jan 21, 2013 - 02:13 PM GMT

By: Money_Morning

Companies

Martin Hutchinson writes: If you're tired of the crisis a month routine we've seen with the United States and the Eurozone, there's always South Korea.

In fact, for demographic and budgetary reasons, South Korea is much like the United States was during the prosperous 1990s--not the deficit-ridden, slow-growing place the U.S. has become.


The truth is South Korea, has very little foreign debt, and recently re-elected the pro-business party by a comfortable margin. What's more, South Korea has kept its government the smallest in the OECD club of rich nations.

So if you haven't considered investing in South Korea you should.

Here's why...

The Brewing S. Korean Tech Boom
Like the U.S. in the late 1990s, though obviously on smaller scale, South Korea has become a technological leader-- especially in display systems like portable computers that can be rolled up like a newspaper and stem cell biotech innovations.

Indeed, its lead in genetic engineering may become more strategic in nature, since Korean public policy does not place the limitations on biotech innovation that the United States does.

What's new is that South Korea is now also a cultural leader, with its "Gangnam Style" pop phenomenon sweeping the world. That's small potatoes in terms of immediate revenues, but it does allow Korea to attract the young, style-conscious and footloose (among whom are many of the world's innovators) in a way it could never have done twenty years ago.

Currently,Korean growth is solid rather than exciting, with The Economist team of forecasters projecting 3.4% growth in 2013.

Nevertheless, with public spending only 33% of GDP compared to 40% in the U.S, a balance of payments surplus and inflation currently running at 1.2% and short-term interest rates well above inflation at close to 3%,

South Korea' economy is poised for a growth acceleration in a way the U.S. economy is not.

With elections out of the way for another 4 years and rapid growth in its huge but poor Chinese neighbor, faster growth should be heading Korea's way.

A Fiscally Fit Government
But those aren't the only reasons to invest. Based U.S. accounting methods, South Korea also runs a budget surplus.

Admittedly, Korea-skeptics like to point out that if you exclude social security, the country runs a deficit of around 0.5-1% of GDP. But if you exclude social security, the United States didn't run a surplus in the late 1990s either.

Like the U.S. in the 1990s and for similar demographic reasons, South Korea actually runs a surplus of 2.5-3% on its social security account since considerably more people are paying into the account than are drawing from it.

Including that surplus, South Korea will run a surplus of 1.5-2.0% of GDP in 2012.

That means the South Korea stands to benefit from its baby boom being a decade or so from retirement, the same way the U.S. benefited from its boomers in the late 1990s.

But you should also note that South Korea's budget is also at least as solid as the U.S. budgets from the1990s. Including social security contributions, Korea has managed to run a surplus in an international environment that is certainly not as bullish as it was the latter 1990s.

What's more, the KOSPI share index is still below its 2007 highs, compared to the late 1990s when U.S. indexes were running at more than double their peak pre-1995 levels.

Three Ways to Invest in South Korea
There are number of ways to play the South Korean market. Here are three:

The largest Korea-oriented ETF listed in the U.S. is the iShares MSCI South Korea Index ETF (NYSE:EWY).

With net assets of $3.34 billion and an expense ratio of only 0.61% EWY is an efficient way of getting exposure to the market as a whole. Currently it has a P/E ratio of only 9 times earnings but a yield of only 0.6%

Korean banks are also very reasonably valued in terms of net assets, yet are currently nicely profitable. The largest is KB Financial Group (NYSE: KB) the parent group of Kookmin Bank. It is currently trading at only 64% of book value and 6.6 times projected 2013 earnings. Based on last year's dividend it yields about 3.2%.

And as mentioned above, Korea is a world leader in display technologies and its leading company is LG Display (NYSE: LPL). LPL has suffered in 2011-12 from a cyclical downturn, but its third quarter 2012 was once again profitable, and based on analysts' estimates it should make about $1.50 per share in 2013, putting it on a forward P/E of 9.3 times.

Source :http://moneymorning.com/2013/01/21/investing-in-s-korea-today-is-like-buying-the-u-s-the-1990s/

Money Morning/The Money Map Report

©2013 Monument Street Publishing. All Rights Reserved. Protected by copyright laws of the United States and international treaties. Any reproduction, copying, or redistribution (electronic or otherwise, including on the world wide web), of content from this website, in whole or in part, is strictly prohibited without the express written permission of Monument Street Publishing. 105 West Monument Street, Baltimore MD 21201, Email: customerservice@moneymorning.com

Disclaimer: Nothing published by Money Morning should be considered personalized investment advice. Although our employees may answer your general customer service questions, they are not licensed under securities laws to address your particular investment situation. No communication by our employees to you should be deemed as personalized investent advice. We expressly forbid our writers from having a financial interest in any security recommended to our readers. All of our employees and agents must wait 24 hours after on-line publication, or after the mailing of printed-only publication prior to following an initial recommendation. Any investments recommended by Money Morning should be made only after consulting with your investment advisor and only after reviewing the prospectus or financial statements of the company.

Money Morning Archive

© 2005-2022 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in