Amid the Emerging Markets Fire Sales, is South Korea a Must Buy?


March 13, 2014

Describing South Korea as an emerging market might be seen as somewhat disingenuous considering the Asian nation has the world’s 15th largest economy, but the various indices that are used across the private equity (PE) and other markets indicate this to be a true description of the country.


The general trend we’re seeing across PE now is that emerging markets are very much a “sell.” At the very least, they are a strong “don’t touch,” although many PE firms and those that have invested through others means tend to be looking at accelerated means of exiting.


In addition to the South Korean government looking at making PE investments easier, as reported by ourselves in January 2014, what are the reasons why South Korea remains a “buy” when some of the world’s biggest PE names can’t get out of emerging markets quick enough?


The reality of South Korea is that, if you take the red tape away surrounding investments, you come across a strong and robust economy, with huge monetary contributions coming from a number of sectors. How many of us own an electrical gadget that was either made entirely in South Korea or includes a component that comes from the country?


That is just one example. Industrial production in the country is on the up, education standards are often reported to be among the highest in the world, and the country has generally shown itself as able to move forward with the times. One only has to look the short distance across to Japan to see what happens when evolution and reinvention isn’t part of the outlook.


As unlikely as it may appear today, in the long-term, reunification of Korea cannot be ruled out, either, and is a scenario that would immediately provide the South with the biggest opportunities in terms of partnerships and further investments.


In the Asian region, China, Japan, and India tend to grab the headlines and column inches, but the smart investor would do well to consider South Korea as a potentially lucrative place to invest both for the short-term and with the longer-term in mind.

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