Korean stocks could go nuclear

If the summit between the US and North Korea is successful and North Korea embarks on China or Vietnam-style liberalisation, South Korean stocks could scoop a “peace dividend”.

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Korea: the tempo is picking up

Korean stocks jumped by a quarter to a new record above 2,500 last year, and are expected to rise further. Korea is a geared play on global growth, given the country's dependence on exports, so the world economy's improvement over the past few months has been key. The constituents of the Kospi are expected to report almost $50bn of first-quarter earnings, eclipsing the previous record set in the third quarter of 2017.

Profits are set to expand by 17% in 2018, yet the market is on just 8.7 times this year's earnings, says Assif Shameen in Barron's. Chalk that up to the "Korea discount'" a reflection of poor corporate governance and low yields. But this may be changing: Korean firms are responding to investors' complaints and upping dividends, rather than focusing only on top-line growth.

And there's another reason to keep a close eye on Korea: a potential "peace dividend" if the summit between the US and North Korea is successful and North Korea embarks on China or Vietnam-style liberalisation. The south has "long eyed a vast market in the north with consumers demanding their first TVs, washing machines smartphones and cars".

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