Most Popular
1. It’s a New Macro, the Gold Market Knows It, But Dead Men Walking Do Not (yet)- Gary_Tanashian
2.Stock Market Presidential Election Cycle Seasonal Trend Analysis - Nadeem_Walayat
3. Bitcoin S&P Pattern - Nadeem_Walayat
4.Nvidia Blow Off Top - Flying High like the Phoenix too Close to the Sun - Nadeem_Walayat
4.U.S. financial market’s “Weimar phase” impact to your fiat and digital assets - Raymond_Matison
5. How to Profit from the Global Warming ClImate Change Mega Death Trend - Part1 - Nadeem_Walayat
7.Bitcoin Gravy Train Trend Forecast 2024 - - Nadeem_Walayat
8.The Bond Trade and Interest Rates - Nadeem_Walayat
9.It’s Easy to Scream Stocks Bubble! - Stephen_McBride
10.Fed’s Next Intertest Rate Move might not align with popular consensus - Richard_Mills
Last 7 days
THEY DON'T RING THE BELL AT THE CRPTO MARKET TOP! - 20th Dec 24
CEREBUS IPO NVIDIA KILLER? - 18th Dec 24
Nvidia Stock 5X to 30X - 18th Dec 24
LRCX Stock Split - 18th Dec 24
Stock Market Expected Trend Forecast - 18th Dec 24
Silver’s Evolving Market: Bright Prospects and Lingering Challenges - 18th Dec 24
Extreme Levels of Work-for-Gold Ratio - 18th Dec 24
Tesla $460, Bitcoin $107k, S&P 6080 - The Pump Continues! - 16th Dec 24
Stock Market Risk to the Upside! S&P 7000 Forecast 2025 - 15th Dec 24
Stock Market 2025 Mid Decade Year - 15th Dec 24
Sheffield Christmas Market 2024 Is a Building Site - 15th Dec 24
Got Copper or Gold Miners? Watch Out - 15th Dec 24
Republican vs Democrat Presidents and the Stock Market - 13th Dec 24
Stock Market Up 8 Out of First 9 months - 13th Dec 24
What Does a Strong Sept Mean for the Stock Market? - 13th Dec 24
Is Trump the Most Pro-Stock Market President Ever? - 13th Dec 24
Interest Rates, Unemployment and the SPX - 13th Dec 24
Fed Balance Sheet Continues To Decline - 13th Dec 24
Trump Stocks and Crypto Mania 2025 Incoming as Bitcoin Breaks Above $100k - 8th Dec 24
Gold Price Multiple Confirmations - Are You Ready? - 8th Dec 24
Gold Price Monster Upleg Lives - 8th Dec 24
Stock & Crypto Markets Going into December 2024 - 2nd Dec 24
US Presidential Election Year Stock Market Seasonal Trend - 29th Nov 24
Who controls the past controls the future: who controls the present controls the past - 29th Nov 24
Gold After Trump Wins - 29th Nov 24
The AI Stocks, Housing, Inflation and Bitcoin Crypto Mega-trends - 27th Nov 24
Gold Price Ahead of the Thanksgiving Weekend - 27th Nov 24
Bitcoin Gravy Train Trend Forecast to June 2025 - 24th Nov 24
Stocks, Bitcoin and Crypto Markets Breaking Bad on Donald Trump Pump - 21st Nov 24
Gold Price To Re-Test $2,700 - 21st Nov 24
Stock Market Sentiment Speaks: This Is My Strong Warning To You - 21st Nov 24
Financial Crisis 2025 - This is Going to Shock People! - 21st Nov 24
Dubai Deluge - AI Tech Stocks Earnings Correction Opportunities - 18th Nov 24
Why President Trump Has NO Real Power - Deep State Military Industrial Complex - 8th Nov 24
Social Grant Increases and Serge Belamant Amid South Africa's New Political Landscape - 8th Nov 24
Is Forex Worth It? - 8th Nov 24
Nvidia Numero Uno in Count Down to President Donald Pump Election Victory - 5th Nov 24
Trump or Harris - Who Wins US Presidential Election 2024 Forecast Prediction - 5th Nov 24
Stock Market Brief in Count Down to US Election Result 2024 - 3rd Nov 24
Gold Stocks’ Winter Rally 2024 - 3rd Nov 24
Why Countdown to U.S. Recession is Underway - 3rd Nov 24
Stock Market Trend Forecast to Jan 2025 - 2nd Nov 24
President Donald PUMP Forecast to Win US Presidential Election 2024 - 1st Nov 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