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Investing in South Korea is Still a Better Bet Than Buying Japan

Stock-Markets / South Korea Apr 07, 2011 - 08:42 AM GMT

By: Money_Morning

Stock-Markets

Best Financial Markets Analysis ArticleJon D. Markman writes: As we get further and further from the March 11 earthquake and tsunami that devastated Japan, investors are going to be looking for opportunities to benefit.

But if you're looking for buying opportunities in Asia, investing in South Korea actually is a much better bet than Japan.


Here's why.

The Asian Development Bank (ADB) in a report yesterday (Wednesday) predicted that
South Korea's economy will grow 4.6% this year. Seoul's official projection is for 5% growth.

"A generally benign global outlook will support exports and healthy private investments, and consumption will underpin growth," said ADB's report, which analyzed economic conditions of 44 Asian countries.

Meanwhile, Japan is still struggling to bounce back from the recent rash of misfortunes it's suffered.

News of the Sendai earthquake is disappearing from the front pages of business news publications, and massive stock purchases by the Bank of Japan (BOJ) have the Nikkei 225 rallying. But the situation is not getting better, putting the Tokyo stock market's recovery at risk.

Japanese power plant officials have been forced to pump water into the nuclear reactors to keep them from overheating, even as highly radioactive runoff leaks out, halting crucial repair work and threatening the environment.

Iodine-131 detected in the Pacific Ocean near the plant site has surged to a new high of 4,385 times the legal limit - compared to the previous top level of 1,850 times the legal maximum just last week.

Experts say the radioactive runoff will be dissipated enough by the Pacific Ocean that it will not pose a threat to humans, but it is not yet known what impact the contamination is having on marine life in the area.

''The figures are rising further,'' nuclear safety agency spokesman Hidehiko Nishiyama said last week. "We need to find out as quickly as possible the cause and stop them from rising any higher."

Some radioactive steam also has wafted into the air, contaminating regional farm and dairy produce, which has led to elevated iodine levels in drinking water in Tokyo, 155 miles to the southwest.

If that's not enough to convince you to look elsewhere for investment opportunities, the accompanying chart illustrates exactly why I would rather invest in South Korea right now.

The chart shows the difference between the iShares MSCI South Korea ETF (NYSE: EWY) and the iShares MSCI South Japan ETF (NYSE: EWJ) coming off their 2009 bear-market lows. Seoul stocks are up 190%, compared with a 40% increase for stocks listed in Tokyo. Indeed, South Korea had significantly outclassed Japan even in the two years prior to that country's March 11 crisis.

Korea is very much a high-tech economy, and I'd be remiss in not mentioning at least one solid tech-related profit play - in this case LG Display Co. Ltd. (NYSE ADR: LPL), a leading manufacturer of thin-film liquid crystal displays (LCDs). Although LG Display's shares have rebounded a bit from their year-to-date lows last summer, they are still only trading at about 12 times earnings. Given Korea's high-tech prowess - and given how important LCDs have become to the global consumer electronics sector - this is a stock that's worth a closer look.

Also, China will need more steel for its auto manufacturing, and that will benefit POSCO (NYSE ADR: PKX), South Korea's largest steel producer. POSCO recently started building a new plant in the Guangdong Province of southern China to produce galvanized steel sheets for cars. It also made a deal with the Guangdong government to collaborate on projects involving stainless steel production, electric vehicles and green city construction.

[Editor's Note: There's a new trading formula that could outperform the world's best hedge funds - and Money Morning guru Jon D. Markman can't wait any longer to tell you about it.

Markman has spent years successfully digging up the best emerging profit opportunities for investors. In fact, anyone who reads Markman's weekly Money Morning column, or subscribes to his Strategic Advantage newsletter, knows his knack for dissecting global financial events and trends.

His goal is to help investors learn the truth about how markets work, and offer ordinary investors extraordinary opportunities.

Now he's bringing you his latest moneymaking discovery, which puts the profit power of hedge fund hotshots in your hands. But he's only offering this new trading service for a brief period. For more information on this new investor offer, click here.]

Source : http://moneymorning.com/2011/04/07...

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