Seoul Trouble? (EWY)
I don't usually write much about my more diversified investments, but my posting earlier about the India Fund (IFN) and some press about Korea have me thinking some about my holdings in the South Korean Index ETF (EWY).
I don't know if I'm going to act on this, but I read a pretty compelling article in the Wall Street Journal, and some interesting related commentary from Seeking Alpha, that have me wondering whether I need to shift some of my Korean holdings elsewhere -- perhaps to build up my holdings in Singaporean conglomerate Keppel, which seems well positioned to me for growth in Chinese and Singaporean real estate, ocean rig demand, and southeast Asian gasoline demand.
Well, Korea is a pretty unique place -- my first investment in S. Korea was in Posco (PKX), which I held in 2004 and sold early in 2005 before starting this site. That seemed to embody Korean investing to me -- incredible cost advantages over other countries, combined with very productive use of technology and a great location for selling to the two engines of Asia, Japan and China ... that, and everything in Korea at the time was selling at a bargain basement rate.
I invested in EWY because I didn't want to focus so much on the steel industry, and I liked the fact that you were essentially getting a first world economy at emerging market discount valuations -- Hyundai and Samsung are world-class companies, regardless of where they're located, and the Korean banks were recovering from credit troubles and still looking very cheap, so the PE ratio on the index was minuscule.
That discount for Korea has gradually eroded, in my opinion, as my EWY shares have advanced 35% or so in a little over a year. That's nothing compared with the sexier Indian markets, but it's certainly a nice profit.
But the labor strife this summer seems much worse than previous Korean strikes have been, impacting some of the biggest manufacturers in this heavily manufacturing-focused and strongly unionized country.
And my exposure to the semiconductor industry, though somewhat indirect, is already pretty strong, and that sector makes up close to 25% of this ETF ... thanks largely to Samsung, which dominates the country's stock market.
So should I take advantage of some possible future weakness -- thanks to labor strife, increasing competition from a resurgent Japan and from homegrown Chinese companies -- and sell before that weakness hits the share price?
Or is this all overblown, and the Korean workers -- like French farmers when the weather turns bad -- will stop the demonstrations and go back to work? And will that make the problems of competition and possible downturns in semis or LCDs seem more manageable? It has been a mistake to bet against Korea in the last few years, so I'll be patient in making any decisions, but this gives me some food for thought.
I don't know if I'm going to act on this, but I read a pretty compelling article in the Wall Street Journal, and some interesting related commentary from Seeking Alpha, that have me wondering whether I need to shift some of my Korean holdings elsewhere -- perhaps to build up my holdings in Singaporean conglomerate Keppel, which seems well positioned to me for growth in Chinese and Singaporean real estate, ocean rig demand, and southeast Asian gasoline demand.
Well, Korea is a pretty unique place -- my first investment in S. Korea was in Posco (PKX), which I held in 2004 and sold early in 2005 before starting this site. That seemed to embody Korean investing to me -- incredible cost advantages over other countries, combined with very productive use of technology and a great location for selling to the two engines of Asia, Japan and China ... that, and everything in Korea at the time was selling at a bargain basement rate.
I invested in EWY because I didn't want to focus so much on the steel industry, and I liked the fact that you were essentially getting a first world economy at emerging market discount valuations -- Hyundai and Samsung are world-class companies, regardless of where they're located, and the Korean banks were recovering from credit troubles and still looking very cheap, so the PE ratio on the index was minuscule.
That discount for Korea has gradually eroded, in my opinion, as my EWY shares have advanced 35% or so in a little over a year. That's nothing compared with the sexier Indian markets, but it's certainly a nice profit.
But the labor strife this summer seems much worse than previous Korean strikes have been, impacting some of the biggest manufacturers in this heavily manufacturing-focused and strongly unionized country.
And my exposure to the semiconductor industry, though somewhat indirect, is already pretty strong, and that sector makes up close to 25% of this ETF ... thanks largely to Samsung, which dominates the country's stock market.
So should I take advantage of some possible future weakness -- thanks to labor strife, increasing competition from a resurgent Japan and from homegrown Chinese companies -- and sell before that weakness hits the share price?
Or is this all overblown, and the Korean workers -- like French farmers when the weather turns bad -- will stop the demonstrations and go back to work? And will that make the problems of competition and possible downturns in semis or LCDs seem more manageable? It has been a mistake to bet against Korea in the last few years, so I'll be patient in making any decisions, but this gives me some food for thought.
Labels: EWY
This article posted by One Guy @ 8/14/2006 12:25:00 PM 0 comments
Add to: del.icio.us *Furl *Google *Spurl *reddit *StumbleUpon *Yahoo MyWeb *
Add to: del.icio.us *Furl *Google *Spurl *reddit *StumbleUpon *Yahoo MyWeb *
