Park Win Lifts Korean ETF as Export Outlook Brightens on China
An exchange-traded fund of South Korean stocks rose in New York as Park Geun Hye was elected president of the Asian nation amid signs China, the nation’s biggest trading partner, is emerging from a slowdown.
The iShares MSCI South Korea Index Fund, an exchange traded fund incorporated in the U.S., added 0.1 percent to $62.38, while the Bank of New York Mellon Corp. (BK) index of Korean American depositary receipts closed little changed at 187.70, after gaining as much as 0.5 percent during the U.S. day.
Park, 60, of the ruling New Frontier Party, led main opposition nominee Moon Jae In, 51.6 percent to 48 percent with 91.4 percent of the vote counted, the National Election Commission said on its website as of 12:25 a.m. in Seoul. Moon, 59, conceded defeat. The election results come as the World Bank said in a report issued yesterday that the economy of China, the biggest buyer of South Korean goods, may “have bottomed out” after a seven-quarter slowdown.
“This government won’t be anti-business, there’s no such tone,” Michael Ding, lead manager of the China Region Fund at U.S. Global Investors Inc. in San Antonio, Texas, which oversees $2.2 billion including investments in South Korean stocks, said by phone yesterday. “The market is also up because of the recovery of Chinese economy. There’s a lot of tailwinds in South Korea’s favor.”
Park will take office Feb. 25, when President Lee Myung Bak’s single five-year term ends. She has pledged stronger support for small- and medium-sized businesses, to help them compete with dominant exporters such as Samsung Electronics Co. and Hyundai Motor Co.
South Korea’s Kospi Index (KOSPI) has rallied 9.2 percent this year, beating the 8.6 percent advance in Taiwan’s Taiex Index. China’s Shanghai Composite Index (SHCOMP) slumped 1.7 percent. Companies on the Kospi trade for an average 12 times estimated earnings, compared with 19 times for the Taiex and a multiple of 11 for the Shanghai gauge of Chinese domestic shares.
The Kospi, which was closed yesterday, added 0.5 percent to 1,993.09 on Dec. 18.
Six-month non-deliverable forwards on the Korean won weakened 0.1 percent to 1082.90 per dollar after the currency added 0.1 percent to 1073.23 versus the greenback on Dec. 18 in Seoul.
Park’s policy adviser Kang Seoghoon said during the campaign that the government shouldn’t seek to artificially weaken the currency to help exporters.
“Both candidates pledged a shift from the current export- driven policies to supporting domestic consumption, in which case there should be fewer attempts to curb won appreciation,” Kim Doo Hyun, the Seoul-based chief currency trader at Korea Exchange Bank, said before the election result.
South Korea’s exports rose for a second month in November, evidence that a recovery is taking hold after the economy expanded at the slowest pace in three years in the third quarter. The World Bank raised its forecast for China’s 2013 growth to 8.4 percent from an October projection of 8.1 percent.
The economy of South Korea is predicted to grow 2.4 percent this year, the slowest pace since 2009. Park pledged to raise wages, increase welfare spending and rein in the influence of the family-owned conglomerates such as Samsung and Hyundai Motor, known as chaebol.
“Park’s victory may be positive to sentiment because her policies on conglomerates, mostly large-cap stocks, are relatively less strict than Moon,” Heo Pil Seok, chief executive officer at Midas International Asset Management Ltd., which oversees $5.3 billion, said from Seoul before the vote result was known. “Still, this political event hadn’t served as a drag on market, so I don’t expect any big impact.”
ADRs of Posco (005490), South Korea’s biggest steelmaker, rose for an 11th day, adding 0.2 percent to $82.97 in New York. It is a record rally for the Gyeongbuk, Korea-based company.
Shinhan Financial Group Co. Ltd. (SHG), South Korea’s largest financial services company by market value, slipped 0.4 percent to $35.15 in U.S. trading. ADRs of LG Display Co. (LPL), the world’s second-largest maker of liquid-crystal based in Seoul, rose for a third day, gaining 0.1 percent to $14.74.
“The election doesn’t make much difference one way or the other,” Mark Williams, chief Asia economist at Capital Economics Ltd., said by phone from London. “The significant factors for Korea are what happens to the global economy over the next few months. There’s still work for the government to on structural reform, but the immediate outlook is determined by what happens to exports.”