A Boom Forged in One Country's National Crisis
Police vehicles surrounded the National Assembly...
Soldiers broke a window and rushed into the parliament building...
And through the chaos, lawmakers raced to the scene to cast an emergency vote.
It was late 2024. President Yoon Suk Yeol had just thrown South Korea into crisis. And while the emergency only lasted about six hours... it changed the course of South Korean history.
Yeol has been replaced by a president with a uniquely strong hand. And that's important for investors today.
You see, what started as a crisis is about to transform South Korea's stock market. Let me explain...
A Midnight Coup Sparks South Korea's Next Market Boom
Yoon appeared on TV on December 3, 2024 to criticize his opposition in the Democratic Party of Korea ("DPK"). The party's parliamentary majority had been stonewalling his efforts... and Yoon had had enough.
Yoon accused the National Assembly of "conspiring to incite rebellion." He vowed to purge the country of "North Korean communist forces."
And then, he declared martial law in South Korea for the first time since 1980. Only the National Assembly could lift the order.
The result was a mad race at 1 a.m. to reach the Assembly before troops could shut it down. Lawmakers jumped over fences in the dead of night to make the vote. Take a look...
The National Assembly unanimously overturned Yoon's decree and impeached the president. He now faces criminal insurrection charges.
The country held early elections for Yoon's replacement this past June.
The winner was DPK leader Lee Jae Myung. And he has political capital to burn. Not only is he backed by voters (winning the election by a sizable margin), but he also has a majority in the National Assembly.
Lee began his road map with a simple promise. As he shared online in April, near the start of his campaign...
Through recovery and growth, we will eliminate the Korea discount and usher in the KOSPI 5,000 era.
"KOSPI" refers to the country's main stock index, the Korea Composite Stock Price Index. It trades at about 4,100... And it was in the mid-2,000s when Lee made his statement.
Lee wants to bring KOSPI to an all-time high of 5,000.
Lee and the National Assembly have also released a $22.1 billion rescue package for the Korean economy. And they've passed significant amendments to Korea's Commercial Act, the nation's highest corporate governance law.
These changes are already working. And they'll help fix one of this market's biggest problems... known as the "Korea discount."
This Bull Run Could Close Korea's Valuation Gap
The "Korea discount" is just what it sounds like. Korean companies earn lower valuations than their peers, despite making comparable profits.
That means investors have dismissed Asia's fourth-largest economy for decades. But Lee's reforms show that he's serious about modernizing Korea's economy.
As a result, Korean stocks are having a terrific year. They're at all-time highs after a multiyear slump.
We can see it using the iShares MSCI South Korea Fund (EWY). This basket of Korean-based companies gives investors broad exposure to the Korean market. Take a look...
Korean stocks turned sideways in 2022. But the market is back in an uptrend, rising 87% year to date.
And with Lee at the reins, Korean stocks could soar much higher before this move is finished.
South Korea is putting the martial-law crisis in the rearview – and turning it into an opportunity. The market is cheering it on. But no one is talking about it right now.
The Korean bull run is one of the market's best-kept secrets... Make sure you don't miss it.
Good investing,
Sean Michael Cummings
Further Reading
"Most investors don't lose money because they're dumb," Gabe Marshank writes. They lose because they're impatient or act impulsively. But investing is a game of discipline, not action. And by looking in the places Wall Street forgets about, you can wait for the next "fat pitch."
Markets have soared to record highs this year. And history shows that the rally still has room to run. But capturing the next leg higher won't take timing or strategy – it'll take restraint. Because in a bull market, the best move is often no move at all.
HIGHS AND LOWS
NEW HIGHS OF NOTE LAST WEEK
Edwards Lifesciences (EW)... medical devices
Cisco Systems (CSCO)... networking tech
Amazon (AMZN)... Big Tech
Apple (AAPL)... Big Tech
Cloudflare (NET)... network security
Zscaler (ZS)... cloud security
Snowflake (SNOW)... data storage
Pure Storage (PSTG)... data storage
Seagate Technology (STX)... data storage
Palantir Technologies (PLTR)... defense-software solutions
Warner Bros. Discovery (WBD)... entertainment
Roku (ROKU)... streaming and smart TVs
First Solar (FSLR)... solar energy
Canadian Solar (CSIQ)... renewable energy
Celestica (CLS)... supply-chain solutions
NEW LOWS OF NOTE LAST WEEK
Automatic Data Processing (ADP)... payroll giant
Cigna (CI)... health insurance
Progressive (PGR)... property and casualty insurance
T-Mobile (TMUS)... telecom
Stride (LRN)... online education
Colgate-Palmolive (CL)... personal-care products
Cava (CAVA)... restaurants
General Mills (GIS)... packaged foods
Molson Coors Beverage (TAP)... beer
Under Armour (UAA)... athletic apparel
Choice Hotels (CHH)... Clarion, Comfort Inn, Quality Inn
Copart (CPRT)... "junkyard giant"