South Korea: four reasons we're wary of Australia's fourth-largest trading partner
South Korea: four reasons we're wary of Australia's fourth-largest trading partner. Second only to China as the MSCI Asia ex Japan Index's largest constituent, most investors hold an 18.5% index weight, but our exposure remains perennially lower. Why? 1. China can no longer do the heavy lifting for Korea. While you could argue how well Korean companies have taken advantage of the spectacular growth in China, as the Chinese economy slows, dependence may very well be a millstone around the neck. 2. The poor state of the banking sector indicates its underlying economic problems. In these countries, bank balance sheets mirror corporate balance sheets. An investment in any of the Korean banks over the past 15 years would have lost you money in US dollar terms. 3. Investors are focusing on the wrong numbers. Korea trades at cheap price earnings multiples - but cyclical businesses should be valued on a price-to-book basis, not on earnings. 4. Korean companies can be risky for minor shareholders. Why are well-known companies like Hyundai and Samsung questionable investments? Read more from Samir Mehta (VIEW LINK)
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