Spotlight Korea: the next China


At one minute past midnight on October 3, 1990, Germany was officially reunified, ending 45 years of national division.

South Korean stock dealers cheer the KOSPI’s record high at the Korea Exchange in Seoul in September 2005. Dictatorships have given way to democracies in countries that liberalized their markets as early as the 1960s and 1970s, including South Korea.

In South Korea, the main tracking index is the Korean Composite Stock Price Index, or KOSPI for short. Originally started in 1964, the index has been modified numerous times over the years, taking its current form in 1994. The KOSPI Index is comprised of 200 of the largest and most liquid issues traded on the Korean Stock Exchange. The index is market capitalization weighted, meaning that firms with the largest market value have the greatest influence on the KOSPI’s returns.

What is China’s reaction to this development? The Chinese government has many times expressed strong support for the Korean peninsula peace process. However, academics and the media have voiced doubt over China’s real position; many conclude that China’s expressions are merely symbolic and diplomatic. Skeptics believe that the Chinese do not favor reunification of the two Koreas and thus do not wholeheartedly encourage the peace process.

To the skeptics, a unified Korea would be a powerful next-door neighbor to China. According to their logic, a powerful neighbor on one’s doorstep would pose a threat to the country. This mentality is typical of geopolitics in the 19th century or during the Cold War. Geopolitics holds that a strong and powerful neighbor will automatically pose a threat, and offer opportunities for that neighbor to make alliances with one’s enemies.

By this analysis, China would not be happy to see a united and strong, rising Korea. It could very likely challenge China’s status in Asia, threatening and destabilizing current political arrangements. What’s more, some analysts even deduce that a future united Korea may seek revenge on China over its dominance of Korea at certain times in history. Therefore any step toward real unification on the peninsula would most likely hurt China’s national interests.

Are these reasonable assumptions? According to such deductions, China should take preventative action before a real integrated and powerful Korea emerges. To avoid this scenario, should China now take precautions against steps toward reconciliation between the two Koreas, even though such moves might cause a setback in its goal of denuclearizing North Korea?

Contrary to the thinking of many geopolitical analysts, a powerful Korea will serve China’s own interests as well. The growth of a united Korea is not likely to surpass Japan’s sustainable growth in the foreseeable future; Japan will remain a powerful force in Asia. China and Korea share many cultural similarities and traditional ties, which are likely to bring them into closer strategic cooperation.

This is a good idea, a good article, good prospect, now the only question is when to jump in?

As of year 2000, The dominant South Korean players are the five largest brokerage houses, which control 95 percent of the online trading market. They include  Daewoo Securities, Samsung Securities and LG Securities. LG Securities saw its online trading volume nearly double last year, while its online trading accounts almost quadrupled in number.’

I contacted someone at Samsung Securities and got discouraged by the strict requirements for opening an account.  Because of Know Your Clients (KYC) requirements, one has to be approved first, make personal appearance, etc.  In other words, too much of a hassle if one is not an institutional investor.

Local HSBC can facilitate us to invest in Korean funds.

HSBC Korea Equity Fund.

Fact Sheet:

Additional Information:

Korean Stock Exchange


Kim Jong Il dies of a massive heart attack today, December 19, 2011. .  The 69 year old has been in power in North Korea since 1994, and it is uncertain what the effect will be on their impoverished country.  Meanwhile, his death sends the U.S. rising

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