Investment led growth in Korea will make iShares MSCI Korea (EWY) one of the better country ETFs to hold for the long-run.
The 15 largest companies in Korea increased their cash by 50% last year, due to reduced investment & capital expenditures coupled with higher profits.
Samsung, the top holding in EWY with 18.3% of assets, saw its cash position climb nearly 90% to $10 billion. Number two holding in EWY, Posco (PKX), saw cash increase 80%.
These companies aren’t sitting on that cash though, and their plans to invest will drive the next growth cycle. Samsung is considering greater investment in memory chips, for instance, while Posco’s ambitious $30 billion South Asian growth strategy will use all the cash the company can accumulate.
Large holdings in EWY aren’t the only ones investing, however. The Federation of Korea Industries says the country’s 30 largest conglomerates will invest nearly $80 billion this year, a record amount.
A healthy economic cycle begins with capital investments that lead to increased production, and then, finally, increased consumer spending. Korea looks poised to begin a multi-year growth cycle and EWY will benefit.
Disclosure: No positions