EWY - EWY: Play The 'Japan 2.0' Theme Via Korea
2024-02-06 07:12:34 ET
Summary
- Korea’s plan to apply the Japanese playbook has received a rather lukewarm market response so far.
- Even after last year’s rally, Korean large-cap valuations remain inexpensive.
- Ahead of a potentially catalyst-rich next few months, the iShares MSCI South Korea ETF screens attractively.
The macro news flow out of Korea has been strong since I last covered the region's ETF, as export growth, led by a cyclical recovery in the chip sector, continues to offset any domestic demand concerns. The more interesting recent development, though, was a new ' value-up program ' outlined by the country's regulator - an unusually market-friendly move inspired by Japan's corporate reform success. In addition to tax benefits, the program will focus on stocks trading below their book value, a perennial problem across Korean large and small caps. At least on paper, the proposal indicates intent - key highlights include value creation plans to uplift return on equity profiles, enhance corporate disclosures, and boost capital returns. There's also an interesting carrot/stick approach to accountability, as supplementing the Japan-like 'name and shame' approach (stick) will be new indices and ETFs for the top shareholder value creators (carrot)....
EWY: Play The 'Japan 2.0' Theme Via Korea