“If you dig a little more, there are some exceedingly cheap valuations for world-class companies. For instance, Kia Motors is trading at 5.9x 2014 PER. Samsung Electronics is also priced at just 6.9x earnings. Some of the domestically-focused large caps are also priced at levels not seen in other markets. For instance, KB Financial, a consumer bank, trades at a 40% discount to tangible book value (net asset value, in other words),” notes Gruber.
Samsung, the General Electric (NYSE: GE) of South Korea, Kia Motors and KB Financial combine for about 26.4% of HKOR’s weight, according to issuer data.
Neither EWY nor HKOR are currency hedged ETFs, which is an advantage in the current strong won environment, but if the Bank of Korea can affect legitimate won weakening, though a dubious prospect, ETFs such as the WisdomTree Korea Hedged Equity Fund (NasdaqGM: DXKW) and the db X-trackers MSCI South Korea Hedged Equity Fund (NSYEArca: DBKO) could flourish.
HKOR Sector Allocation
Data Courtesy: Horizons ETFs