After a thorough pummeling during the financial crisis, South Korea and its related exchange traded fund (ETF) have made a quick rebound, but the country is still suffering from languid global demand.
South Korea’s faster-than-expected growth in the second quarter has allowed Fitch to raise its rating outlook for the country, while the Central Bank may take steps to raise interest rates, report Yoo Choonsik and Seo Eun-kyung for Reuters. Finance Minister Yoon Jeung-hyun stated that the second-quarter growth is expected to spike 2.7%, the largest in seven years.
The good news about South Korea:
- Fitch was impressed by the country’s strong fundamentals and the ratings firm believes South Korea’s forex credit crunch has eased significantly. Fitch currently has a sovereign rating for South Korea, S&P rates the country A and Moody’s stamps the country with a AA rating. The upgraded outlook should help companies and institutions raise foreign funds at a lower cost.
- China’s growing middle class is becoming a huge target for South Korean exporters, comments Jonathan Thatcher for Reuters. South Korea may not have an edge over China in labor-intensive industries, but it does have a technological lead in products such as flat panel screens, memory chips, autos and mobile phones.
- Trade Minister Kim Jong-hoon believes that S. Korean companies still maintain the upper hand in quality, marketing and after-sales services over those of Chinese firms, and it is these characteristics that will make S. Korea a global competitor.
On the down side, global demand for goods is still lagging and South Korea’s exports in August continued their double-digit annual declines for the 10th consecutive month, writes Yoo Choonsik for Forbes. Exports dropped 20.6% in August from the same month last year, while imports plummeted 32.2% year-over-year, resulting in a trade surplus of only $1.67 billion
- iShares MSCI South Korea Index (EWY): up 54.5% year-to-date
For more information on South Korea, visit our South Korea category.
Max Chen contributed to this article.
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.