Korea Still The Most Attractive In Asia

Watch the video with Andrew Stotz or read a summary of the country profile on Korea.

Four Pillars of GDP: Trade deficit hurting GDP growth

Overall, the GDP growth in Korea is relatively slow but tracks other major OECD countries. Quite positive growth in private consumption, the main driver of the economy, was offset somewhat by a starkly negative trade deficit.

High EPS Growth Expected

Like years past, the infamous “Korea discount” remains a fact of life. Still, 2017’s expected price-to-earnings ratio of 9.6x is about 4 multiples lower than the 2016 average, so there may be value in that haystack.

Some investors may take a wait-and-see approach to the new political establishment. Jae-in Moon became president on 10 May 2017, following the impeachment of former president Geun-hye Park.

But the consensus EPS growth estimate for 2017 is a massive 40%, an attractive data point to be sure.


A. Stotz Four Elements: Korea is the most attractive market

Overall, Korea is the most attractive stock market in Asia considering all our four elements: Fundamentals, Valuation, Momentum, and Risk.

Fundamentals: Poor due to low profitability.

Valuation: The “Korea Discount” remains a factor.

Momentum: Massive earnings growth and good price momentum.

Risk: High beta to Asia ex-Japan.

Strong performance in Materials and Consumer Discretionary

Top 3 largest sectors: Information Technology: 33% of the market; Consumer Discretionary: 14%; Industrials: 13%.

Best sector & stock: Energy: +17.5%, GS Holdings Corp.: +27.4%.

Worst sector & stock: Utilities: -0.7%, Korea Electric Power Corp.: -2.2%.

Article by Dr. Andrew Stotz, Become A Better Investor


About the Author

Dr. Andrew Stotz, CFA
Dr. Andrew Stotz, CFA is the CEO of A. Stotz Investment Research, a company providing institutional investors with ready-to- invest portfolios in Asia that aim to beat the benchmark through superior stock selection. The company also provides buy- and sell-side clients with financial models to value any company in the world and World Class Benchmarking to determine what companies are financially world class. Previously, as Head of Research at CLSA, Andrew was voted No. 1 Analyst in Thailand in the Asiamoney Brokers Polls for 2008 and 2009. He was also voted No. 1 Analyst in Thailand in the 2009 Institutional Investor magazine All-Asia Research Team Report. Andrew earned his PhD in finance at the University of Science and Technology of China in Anhui province, with a focus on answering questions raised by fund managers and analysts during his career about picking stocks and managing portfolios. In addition, Andrew has been a lecturer in finance for 22 years at various universities in Thailand. Since 2013, he has been the president of the CFA Society of Thailand. He is also the author of How to Start Building Your Wealth Investing in the Stock Market.