Korea saw a large influx of foreign investment in its stocks in the third quarter of the year. The country’s market is valued attractively and some of its largest companies, like Samsung Electronics Co., Ltd. (LON:BC94) (KRX:005930), are involved in growth industries. A new analysis from CLSA’s GREED & Fear says that the inflows are a result of investors looking for safety rather than looking for returns.

According to the report, which was authored by GREED & Fear analyst Christopher Wood, the Korean stock market has seen inflows of $12.9 billion from around the world since the start of July. In the first half of the year, foreign investors withdrew $8 billion from Korean equities. There’s a reason for the flip.

GREED & Fear In Korea

The case that Wood makes is a compelling one. He says that the Korean market was used by foreign investors to hide from the potentially disastrous effects of a Federal Reserve QE taper. Korea is a defensive market, but it is not primed for growth. The P/E ratio of the 85 Korean firms that CSLA follows is 9.8 times 2013 earnings and just 8 times 2014 earnings.

In contrast, the P/E ratio for the S&P 500 is over 18 right now. The Korean market did not inflate along the same lines as U.S. stocks in the first half of the year, and that makes them an attractive bet in the face of Federal Reserve policy changes. Korea is not for absolute return, it’s for relative return in the face of danger.

Despite the nomination of Janet Yellen as Federal Reserve chairman, GREED & Fear does not see taper trouble disappearing. That means that Korea may continue to act as a haven for investors through 2014. The chances of absolute return in the Asian economy remain slight, however.

There is only one major thing that could spark growth in the Korean stock market according to GREED & Fear. The world economy has to improve. According to Wood, that has not been seen in Korea. Exports are down more than 3 percent in the fourth quarter in Korea. The report projects that a pick up in world growth isn’t coming any time soon.

Korea is not for the adventurous

Assuming that the report’s predictions about the world economy are accurate, Korean stocks are not for those looking to make big returns. As seen in the most recent U.S. labor report, the economy in North America is not growing as hoped in 2013. The Eurozone may be just around the corner from another crisis, and demand in China is not looking good.

There is plenty for investors to be defensive about in the year to come, even if Federal Reserve taper talk lessens when Janet Yellen takes the reigns. Investors looking for returns will probably want to look past Korea, but those looking to protect their investments may want to take a look at Korean Stocks.

Investing in Korea almost assumes a negative view of the world in the medium term. Investors looking to risk the macro-economy and seek absolute return should stay away.