Amid Thawing Inter-Korean Relations

A

South Korea’s asset management firms are competitively launching so-called unification investment funds focused on firms that may benefit from future inter-Korean economic cooperation.
South Korea’s asset management firms are competitively launching so-called unification investment funds focused on firms that may benefit from future inter-Korean economic cooperation.

As inter-Korean relations are thawing, South Korea’s asset management companies are stepping up efforts to explore North Korea-related business opportunities.

Samsung Securities Co. has recently created a North Korea research team for the first time in the industry. Securities companies are providing analyses of promising companies for each phase of inter-Korean economic cooperation. They are also preparing seminars for investors.

Asset management firms are competitively launching so-called unification funds, attracting investment in firms that would benefit from future inter-Korean economic cooperation.

The investment banking (IB) industry believes that the thawing of North and South Korean relations will not end up in a simple economic exchange. It forecasts the creation of a North and South Korean economic community in the near future and then the establishment of a new economic belt across Eurasia. The industry is confident that economic cooperation between North and South Korea will expand continuously, although the pace could slow at some periods.

The asset management industry made the first move. It aggressively released funds that invest in companies related to economic cooperation between North and South Korea. These unification funds invest in construction or railway firms. This is because there will be more inter-Korean business opportunities as relations between North and South Korea are improving.

On May 14, UBS Hana Asset Management Co. launched the Hana UBS Greater Korea stock fund. Though the Greater Korea fund invests in large-cap shares, including Samsung Electronics Co., the rest of the investment is in shares related to inter-Korean cooperation. Samsung Active Asset Management Co. also redesigned the Samsung My Best fund made up of large-cap and blue-chip stocks into a unification fund. BNK Asset Management Co.’s BNK Brave New Korea fund, which is scheduled to start accepting investments this month, will invest in shares from companies that are planning on entering North Korea.

The IB industry thinks that North Korea is highly likely to benchmark China and Vietnam for its economic opening, establish diplomatic relations with US and introduce a market economy system under the government control.


According to a recent report released by Daishin Securities Co., the economic cooperation between North and South Korea is divided into three stages – resumption of inter-Korean projects and humanitarian assistance for North Korea, investment in infrastructure after listing sanctions against North Korea and expansion of the North Korean market.
 

The report said pharmaceuticals, fertilizer, agricultural machinery, clothing, home appliances and tourism are promising industries at the stage of resumption of inter-Korean projects and humanitarian assistance for North Korea, construction, construction materials, steel, railway, machinery, utilities, communications, transportation and insurance at the stage of infra investment in North Korea, and home appliances, automobile, media and clothing at the stage of the North Korean market after the construction of infrastructure. Lee Kyung-min, an analyst at Daishin Securities, said in the report, “The United Nations Security Counci and the US lifting sanctions against North Korea, North Korea establishing diplomatic ties with the US and North Korea joining international organizations will accelerate economic cooperation between North and South Korea and North Korea’s economic opening. It requires a phased approach.”

Huh Nam-kwon, CEO of Shinyoung Asset Management Co., said, “Stocks related to inter-Korean cooperation fluctuate with issues but it is a matter of speed as long as the direction does not change.”

Copyright © BusinessKorea. Prohibited from unauthorized reproduction and redistribution