Korea was the best performing country among the MSCI major equity markets for the first four months of this year, up 18.1%, according to MSCI data. The performance is despite the political turmoil of the past 12 months, when the nation’s president Park Geun-hye was impeached amid a corruption scandal, resulting in a May election in which Moon Jae-in assumed the office.
“The Korean market has experienced a series of political events in the past, such as North-South tension and presidential elections. Major events have proven to have short-term impact as the markets tend to rebound,” he said.
The recent presidential election was smooth and met investor expectations, acting as a positive driver for the stock markets, he said.
Samsung Electronics, one of Korea’s top companies, also faced a year of trouble, including the well-publicised danger posed by its smartphone battery and the arrest of vice chairman Lee Jae-yong.
But Kwong remains a believer in the company and it is the second largest holding in the Parvest Equity Best Selection Asia ex-Japan Fund, which he manages.
“The firm is so big that it is no longer controlled by the family or a spiritual leader, but by professionals. The management structure has been modernised and is a good sign for Korean companies,” he said, adding that big family-owned conglomerates or chaebols dominate the economy.
“These companies already have their share prices discounted because of this [family] ownership structure. So to analyse Samsung one should focus on leadership and new development of its tech products. So far it is delivering,” he added.
Kwong prefers export-driven companies in Korea rather than those focused on domestic consumption, such as financial companies and department stores. The aging population does not support consumption growth, he believes.
But some companies, such as cosmetics makers, can be considered export-driven because the largest demand is coming from China, he added. “The domestic market has already matured and is not growing. Instead, China is a big market for these companies.”
The three-year performance of Korea’s benchmark KOSPI and the MSCI Asia ex-Japan index, according to FE.
The chart below shows the three-year performance of the Parvest Equity Best Selection Asia ex-Japan Fund and its benchmark MSCI Asia ex-Japan Index, as well as the Parvest High Dividend Pacific Fund (its benchmark is not available). Both funds are managed by Kwong.
