Korea Konsiderations

Reading William Pesek's Bloomberg column -- How to Get Buffetts of the World Excited About Korea -- reminded me of something I read years ago in Grant's Interest Rate Observer. (Or at least that where I think I read it.)

Talking about the abundance of red tape and lack of shareholder rights on the Korean peninsula, Grant's quoted an investor saying something like: "The communists are in the South, the people in the North are like mental patients who refuse to take their medication."

I'm sure things are better than a decade ago -- and they'd better improve more still if Seoul is to rival Singapore or Hong Kong as a regional financial hub.

I've owned exactly two Korea-specific investments in my life. One is Korea Electric Power (KEP/NYSE), which I still hold partially. I revealed that previously on this blog, several times, but it's not listed in the "Current Holdings" menu at the right. Why? Because I purchased the position before launching this site in April 2005, it more than doubled and I sold half my position. And this site is about my adventures as a stock picker and covers stocks I'm buying or adding to. Korea Electric Power doesn't qualify. (But don't worry, regular readers. The vast majority of my investment portfolio is in those "Current Holdings" stocks.)

The other Korean-specific investment was a closed-end fund I brilliantly bought just in time for the Asian crisis in the 1990s. I eventually did okay. But, man, it was one heck of a wild roller coaster ride with a steep drop on the way to profitability.

Comments

[A]

There are a few great companies in Korea, but the under-the-table culture is prevalent. Even a company like Posco gains part of its competitive advantage from historical dealings with the old military government, the benefits of which extend to its dealings with politicians today.

In my view, for Seoul to become financial power like Tokyo, it needs more than accounting ordinances. It must open their markets and remove protectionist regulations or Korea will always be subject to oligopolies.

[John]

A: I can't disagree with anything you've said. Shareholder-friendly managements still aren't as prevalent outside the Anglo-Saxon style capitalist countries (though there are never guarantees anywhere).