Value Investing

Value Investing in South Korea – Part I

Being value investors seeking undervalued opportunities within Asia, we believe in constantly seeking out investments that offers us the best asymmetrical reward ratio. That said, there are many value investors within the usual Asian countries such as Singapore, Japan, Australia, Hong Kong and now China. However, what about South Korea?

South Korea offers many attractive value investing opportunities. Given the amount of marketing and media coverage, we know that it is irrefutable that there are many Korean companies that have great earnings power – think Samsung. Furthermore, if one delves deeper into these companies, one would realize the solid balance sheet and strong cash flows these South Korean companies possesses. As with every country, each country has its own unique characteristics resulting in an anomaly in market prices.

While we know that Hong Kong is benefiting from China’s growth, China experiencing huge growth (while GDP growth rates have started slowing down, 7% GDP growth rates are still considered high) or Japan, which seems to be on track of recovery due to Abenomics. However, what do we actually know about South Korea other than that they have a trending k-pop culture and gadgets that we all use today. Hence, in today’s article, we will be sharing an introduction of the South Korean economy compared to other developed countries.

South Korea – Country Overview

GDP USD 1.435 trillion 11th
GDP per capita PPP USD 33.1 thousand 30th
Average GDP Growth Rate 5% n.a.
Unemployment Rates ~3% 27th

Sovereign Credit Rating (Fitch Ratings)

Country Credit Rating
United States / Australia / Singapore AAA
United Kingdom / Hong Kong AA+
South Korea AA-
China / Japan A+


Value Investing in South Korea - Part I

Looking at the past 10 years, where the global economy experienced both a recession and a boom, we see that the KOSPI has actually performed better than the S&P500, despite the S&P500 trading at all time high levels now. The KOSPI would have returned ~125% against the S&P500 return’s of ~75%.


Country CAPE PE PB
China 18.4 10.1 1.5
Hong Kong 18.7 12.4 1.4
South Korea 12.6 14.9 1.0
Singapore 13.8 15.7 1.4
Malaysia 19.5 16.5 2.0
Japan 28.1 17.7 1.5
Thailand 17.4 20.2 2.2
United States 28.8 20.6 2.9
United Kingdom 13.1 23.9 2.1

Having sorted the rankings based on P/E, one would notice that South Korea trades at reasonably lower valuations than many other developed countries. This holds true for other metrics as shown in the table above as well.

Final Word

Having covered some key aspects of the South Korean economy, we believe that it definitely is an interested market to look into, especially with the lack of coverage and institutional players. Subsequently, we would be sharing on some forms of mispricing opportunities that presents itself in South Korea.

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