On Monday, South Korean equities were the world's worst performers. On Tuesday, they were among the best. Whatever the outlook over the 38th parallel, investors - particularly foreigners - won't easily take fright.
Consider Samsung Electronics, the 150 trillion (South Korean Won, $130-billion) bellwether, accounting for 15 per cent of the capitalization-weighted Kospi.
On Monday, as local funds were net sellers of the stock, U.S. institutions lifted their collective ownership more than one percentage point, to 32 per cent. And why wouldn't they look to increase exposure to a company whose shares are up 7 per cent this year, while the benchmark is down 13? Between July and September Samsung made four times as much net profit as Japan's 19 listed technology and consumer electronics companies, put together.
Authorities, of course, have been busily spreading calm. The National Pension Service, the nation's biggest investor, has made it known that it bought stocks on Monday, while central bank governor Kim Choong-soo and finance minister Bahk Jae-wan say they will stabilize markets if needed. Yet even without this help from high places, there are compelling reasons for foreigners to stay put. This relatively small and open economy naturally suffers when trade suffers: the old rule of thumb is that South Korean growth falls by one percentage point for every percentage point reduction in global growth. Even so, consensus forecasts are for Korean gross domestic product to grow by about 3.8 per cent next year -- among the highest of the G20 major economies.
Exuberance may need to be checked a little: the proportion of South Korean companies missing third-quarter earnings estimates was exceeded only by the Taiwanese in Asia, notes Morgan Stanley. But given that the Kospi has beaten other emerging-market benchmarks by about 9 per cent this year, perseverance has already been rewarded. Whatever is going on behind the doughy features of Kim Jong-eun, few investors should cut and run without good reason.