The South Korean economy grew at its fastest rate in seven years in the third quarter of 2017. Experts say momentum will hold. Provided conflict in the region is avoided, South Korea should continue to grow strongly over the coming year. The prediction is that South Korea will benefit from healthy global trade, rising government spending and a big hike in the country's minimum wage. Investors are showing optimism about South Korean companies, too. The benchmark Kospi index has soared to record highs recently and is up more than 22% since the start of the of 2017. That beats the Nasdaq and the Dow over the same period. The South Korean index has been helped by heavyweight stock Samsung Electronics, which has shrugged off last year's Galaxy Note 7 debacle and the corruption conviction of its de facto leader to post a gain of more than 45% in 2017.
The country's economy expanded 1.4% in the third quarter of 2017, compared with the previous three months of the year. That comfortably beat economists' forecasts and was propelled by a 6.1% jump in exports. The main problem looming over the economy is the high level of household debt. But the expectation is an increase in the minimum wage next year to prop up spending by consumers.
The Stock market
Small caps are the best bet in Seoul as the broader profit outlook in the $1.4 trillion Kospi market dims. Overseas funds already made that call, pumping 2.7 trillion won ($2.4 billion) into the smaller tech-focused Kosdaq gauge in 2017 and selling a net 5.6 trillion won of Samsung shares. The healthcare industry has the biggest potential for growth in Asia. In 2018, some healthcare companies, especially those that can export their technology, could be targeted. When it comes to the cosmetics industry, fund managers have been reducing holdings in large-cap cosmetics stocks that rallied this year as tensions eased between South Korea and China and reallocating money to smaller original design manufacturer-based cosmetics names. Korea Kolmar Co., an ODM-based cosmetics maker, gained 28 percent this year, compared with large-cap AmorePacific Corp, whose shares have stayed flat. Overall, South Korean healthcare and cosmetics companies are robust in terms of their margins and earnings power.