South Korean stocks: a bet on global growth

South Korean stocks have slid by around 5% this year, but the outlook is improving. The Kospi index has always been highly exposed to the global cycle, since exports account for 55% of GDP. Tech giant Samsung comprises 20% of the market and car group Hyundai makes up 5%.

The weather-related disruptions to global trade of the past few months now seem to be wearing off, notes Morgan Stanley. Korean exports grew by 9% year-on-year in April, from 5% in March.

America, where the recovery appears to be strengthening, is especially important. Every 1% change in US growth implies a 0.8% change in Korea’s figure, says Bank of America Merrill Lynch.

Unlike many emerging markets, Korea runs a current account surplus, so it doesn’t depend on foreign cash. At the same time, its solid infrastructure, political stability and highly educated workforce make it an attractive investment destination.

Finally, stocks are on just nine times this year’s earnings, making South Korea Asia’s cheapest market bar China, says Assif Shameen in Barron’s. Exchange-traded funds (ETFs) such as the DB X-Trackers MSCI Korea TRN Index ETF (LSE: XKSD) may now be worth looking into.

• Stay up to date with MoneyWeek: Follow us on TwitterFacebook and Google+

MoneyWeek magazine

Latest issue:

Magazine cover
Why you should worry about Greece

...and how to protect your wealth

The UK's best-selling financial magazine. Take a FREE trial today.
Claim 4 FREE Issues

From ADRs to Z scores – all the terms you wish you understood, but were too embarrassed to ask about.

Gervais Williams: if you want real dividend growth, buy small-cap stocks

Merryn Somerset Webb interviews small-cap stock expert Gervais Williams about how penny shares outperform blue chips 'again and again'.


Which investment platform is the right one for you?

When it comes to buying shares and funds, there are several investment platforms and brokers to choose from, with varying fees and charges. Find out which is best for you.


7 July 1753: The British Museum is established by Act of Parliament

On this day in 1753, Parliament passed the British Museum Act, providing for a public lottery to raise £300,000 to build a home for the nation's treasures.


Anatomy of a Grexit: how Greece would go about leaving the euro

Jonathan Loynes and Jennifer McKeown, economists at Capital Economics, look at the key issues and challenges of a Grexit, how it might be best managed, and set out a timetable for change.