Macro Monday 48 – The Specialists, South Korea Macro Monday 48 – The Specialists, South Korea
Apologies for the delay in this weeks release
South Korea appears to be an economy that is taking the specialization approach with a strong innovative focus on biotechnology, pharmaceuticals, heavy machinery, vehicles, specialized battery components and major EV battery manufacturing. The country is not just seeking to be the main manufacturers on a global scale of these products, but appears to be striving to be specialists in providing the most technologically advanced methods to drive the most advanced products in the marketplace.
South Korea is 6th in the World for Global Innovation
South Korea has recently achieved significant economic outperformance through technological innovation. South Korea jumped from rank 10 in 2020 to rank 5 in 2021 in the Global Innovation Index. Currently in 2024 South Korea is ranked 6th. This rise is attributed to its strong performance in industries related to public health and the environment, as well as its advancements in digital innovation, built on artificial intelligence, supercomputing, and automation. South Korea’s focus on deep science innovation, including biotechnologies and nanotechnologies, has also contributed to its economic success.
23.7% of the Global EV Batteries are Manufactured in South Korea
South Korea is a significant player in the global battery market. South Korean electric vehicle (EV) battery manufacturers; LG New Energy, SK On, and Samsung SDI collectively accounted for 23.7% of the global EV battery market in 2022, a staggering contribution to this thriving market.
South Korea are Electrical and Heavy Machinery Specialists exporting $171.3 billion in 2023 (accounting for 27 % of total exports)
South Korea is a significant player in the global heavy machinery market. While specific figures detailing South Korea’s exact percentage share of the global heavy machinery market are not precisely available, the country is known for its substantial contributions to the sector. South Korean companies like Doosan Machine Tools and Hyundai Wia are leading providers in the machine tool industry, with Doosan Machine Tools holding a market share of 49.3 percent within South Korea.
The country’s heavy equipment market is also characterized by a diverse range of products, including construction equipment, forklift trucks, and cranes, with major players like Caterpillar Inc, Hitachi Ltd, and Hyundai Construction Equipment Ltd, all contributing to its growth. South Korea’s focus on innovation and quality in manufacturing has positioned it as a key exporter of heavy machinery on the international stage.
The South Korean Stock Market - The KOSPI
The KOSPI (Korea Composite Stock Price Index) is akin to the S&P 500 in the U.S. however can have up to 800 companies included in the index. As an alternative you can review the KOSPI 200 which only includes the top 200 South Korean companies, but for today we will focus on the general KOSPI.
The top 5 largest companies in the KOSPI index:
1. Samsung Electronics (20% of the index): A global leader in technology, Samsung Electronics specializes in a wide range of consumer and industry electronics, including appliances, digital media devices, semiconductors, memory chips, and integrated systems.
2. SK hynix: The world’s second-largest memory chipmaker, SK hynix produces dynamic random access memory (DRAM) chips, flash memory chips (NAND), and CMOS image sensors (CIS) for a diverse global clientele.
3. Samsung Biologics: A biotech division of the Samsung Group, Samsung Biologics provides contract development and manufacturing (CDMO) services to the biopharmaceutical industry.
4.Naver: South Korea’s premier internet company, Naver operates the nation’s top search engine and offers a range of services including online marketing, e-commerce, and content development.
5.LG Chem: Founded in 1947, LG Chem leads the chemical industry in Korea and globally, providing products like ABS, polarizers, and EV battery cells. It has a vast network for production, sales, and R&D across the world.
The KOSPI is traded in the South Korean Won (KRW) and I will show it to you for illustration purposes however when measured in USD, there has been a long term oscillation of price with no real sustained gains.
As I do not see an opportunity in trading the KOSPI, lets look at Samsung, one of the largest allocations in the KOSPI.
SAMSUNG (Ticker: 005930.KS)
You can clearly see that Samsung which is headquartered Suwon-si, South Korea has a long term ascending channel in both the KRW and in USD. There is a clear long term trend and opportunities to buy at the bottom of the channels.
Samsung primarily trades on the Korean Stock Exchange and has global depositary receipts that are listed in Europe, making it relatively easy for South Korea and Europeans to invest.
Unfortunately, Samsung shares don't trade on a U.S. stock exchange and the company doesn't offer American Depositary Receipts (ADRs), making it difficult for Americans to invest in the company. Sometimes Macro Mondays leads to a dead end for some traders and investors out there, you can still access Samsung through a variety of general ETF's for general exposure.
What is clear from the above, is that these waters appear much more murkier than the Indian stock indices we covered last week which are performing nicely since sharing. India has a GDP growth of 6%+ whilst South Korea is 2.6% at present (global average is 2.9%).
I could not really recommend a trade off the above South Korean charts covered, however we have an better understanding of the South Korean market, economy and offerings. We also have an idea of some of the larger companies and we can investigate this further down the line for opportunities.
All these charts are available on my Tradingview Page and you can go to them at any stage over the next few years press play and you'll get the chart updated with the easy visual guide to see how the South Korean market has performed. I hope its helpful.
PUKA
