A rising dollar and global inflation might be keeping traders from looking at potential opportunities in emerging markets (EM). However, they need to take a closer look at South Korea.
After Covid-19 cases and rising inflation tempered South Korea’s economy in Q1, a Q2 comeback could be in play. There are already signs of a recovery surfacing.
“We are already seeing early signs of a recovery in private consumption as the government lifts most restrictions while the trade balance is going to record a deficit for a couple of months in the near future,” said ING economists.
Much of South Korea’s growth can be attributed to wise investment of capital. Macroeconomic stability has been able to provide a ballast against economic shocks, such as the Covid-19 pandemic.
South Korea’s growth prospects are already threatening the third largest economy—Japan. Growth projections by the International Monetary Fund (IMF) show that South Korea could surpass Japan’s real GDP per capita by an even wider margin (it surpassed Japan four years ago).
“By 2026, the International Monetary Fund projects that South Korea will be 12 percent ahead of Japan,” an East Asia Forum article pointed out. “What makes this event all the more important and illuminating is that South Korea shares so many of Japan’s structural flaws. South Korea’s ability to ameliorate those flaws provide lessons for Japan.”
“South Korea overtook Japan because its growth in productivity has outpaced Japan,” the article said further. “Until the early 1990s, Japan was rapidly catching up to the United States. Its productivity peaked at 71 per cent of the United States’ level in 1997. Since then, it has fallen back to just 63 per cent. By contrast, South Korea’s productivity has continued growing and is now just a few percentage points behind Japan.”
Playing South Korea’s Growing Economy
With South Korea projecting bullishness, traders can play its growing economy using leveraged exchange-traded funds (ETFs) such as the Direxion Daily South Korea Bull 3X Shares (KORU).
KORU seeks daily investment results that equate to 300% of the daily performance of the MSCI Korea 25/50 Index. The index is designed to measure the performance of the large- and mid-cap segments of the South Korean equity market, covering approximately 85% of the free float-adjusted market capitalization of South Korean issuers.
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