South Korea, the motherland of powerful companies such as Samsung, LG, and Hyundai, looks primed for economic growth in the coming months. If that is true, investors can look to exchange traded funds (ETFs) to benefit from the upswing.
Two main developments give cause for bullish sentiment on the South Korean economy in the coming months. The first has to do with the revaluation of the yuan, and the second has to do with recent economic forecasts released by Korea’s central bank.
Under increasing pressure from world governments, China finally seems to be hinting at allowing its currency to appreciate, reports Lee Hyo-sik of The Korea Times. In the short run, an appreciation of the yuan relative to the dollar should help Korean exports be more price-competitive in the global market. But in the long run, a revaluation will also raise consumer prices and put upward pressure on the South Korean won, reversing the positive effects of a stronger yuan in the short run. [ETFs to Watch as Chinese Yuan Battle Heats Up.]
Although some U.S. lawmakers have demanded a revaluation by as much as 40%, analysts predict a 3%-5% appreciation in the value of the yuan.