Demand for construction and ship building will propel Korea through a period of economic growth, according to Barings.
The asset management group is bullish on Korean prospects, saying it should be looked at in the same way as the BRIC countries – Brazil, Russia, India and China.
Barings says although Korean economic growth slowed between 2003 and 2005, the economy has now turned a corner.
It also noted tensions between North Korea and South Korea were easing, with trade between the two expected to top $1.7bn in 2007.
Baring Korea trust manager Hyung Jin Lee says the country is “making just what the world needs”.
"As the largest shipbuilder in the world, Korea has seen a surge in orders from the Middle East and other sources, but it is not just its shipbuilding industry that is seeing such high demand,” Lee says.
“The rapid development of real estate in Dubai and elsewhere in the region has fuelled demand for Korean engineering and construction expertise, as well as high quality technology and services.”
Barings noted Samsung, LG and Hyundai as just some of the many Korean companies to gain a foothold in competitive Western markets.
It says it expects local share demand to remain strong.
“Korean pensions and other institutional investors are starting to increase their relatively low local equity holdings, further benefiting the Korean equity market,” Barings says.
“We expect to see a further re-rating of the Korean market as the ‘Korea discount’ narrows further and corporate fundamentals improve.”
Lee says the strong growth in the Middle East region has reduced Korea’s dependency on the United States.
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