The “Asian Tigers” Revisited

Today, it’s the BRIC economies of Brazil, Russia, India, and China that are all the rage. Yet 15 years ago, it was another group of four economies — Taiwan, South Korea, Singapore, and Hong Kong — that were attracting the attention of global investors.

The Asian Tigers became the first group of developing countries to successfully transform themselves between the early 1960s and 1990s from economic backwaters to cutting-edge global economic powerhouses. Today, the original Asian Tigers have become substantial global economies on their own, with South Korea boasting a GDP of $929 billion; Taiwan $699 billion; Hong Kong $215 billion; and Singapore $182 billion. Taken together, the Asian Tigers boast an economy worth more than $2 trillion. That would make them, together, the eighth-largest economy in the world.

Put another way, the Asian Tigers generate about 50% of the economic wealth that China does, with only 6% of the population.

Understanding the reasons behind the success of the Asian Tigers is a key to identifying which countries in the rest of emerging East Asia — Indonesia, Malaysia, the Philippines, Thailand and Vietnam — will be successful in generating the outsized investment profits that investors enjoyed over the decades of their emergence.

The Remarkable Rise of South Korea: The “Miracle on the Han River”

If there is a first among equals within the Asian Tigers, it is South Korea. 

Half a century ago, South Korea’s economy was as poverty stricken as Upper Volta. Today, South Korea has transformed itself into the world’s 10th-largest economy. Thanks to the “miracle on the Han river” — named after the river that runs through its capital, Seoul — per capita annual income grew from US$87 in 1962 to US$24,800 today.

Infrastructure in South Korea is excellent. The streets are clean. The roads are smooth and fast. Buildings are modern. The trains and buses run so frequently, you never have to wait. Seoul’s Incheon International Airport recently was rated as the top-performing airport in the world for the fourth-consecutive year. South Korea also is the most “wired” country in the world, with 93% of South Korean households receiving broadband, and free Internet access is available on trains, on buses, and in taxis.

Since its inauspicious beginning, Korea transformed itself into a world leader in shipping, semiconductors, digital displays, and consumer electronics. It was only a decade ago when Japanese companies like Toyota and Sony were leading the pack in quality and innovation. Today, Samsung, LGE and Hyundai have taken on that mantle. Once the butt of late-night TV jokes, Korean automobile manufacturers such as Hyundai have surpassed German rivals Mercedes and BMW in quality surveys.

There is no higher-profile emblem of South Korea’s success than consumer electronics giant Samsung. If yesterday belonged to the Sony Walkman and PlayStation, today belongs to Samsung’s dazzling array of high-tech gadgetry. Today, Samsung has sales of $120 billion — more than double that of Microsoft — along with a reputation for making hip and sophisticated mobile handsets, MP3 players, televisions, and digital cameras. Samsung ranks ahead of Japan’s Sony in televisions and trails only Finland’s Nokia in mobile phones, recently having overtaken Motorola. Samsung’s stock market capitalization, at over $110 billion, is more than three times that of Sony and is second only to Apple among consumer electronics companies.

The Remarkable Rise of South Korea: Putting Money in Your Pocket

While stories of Asian growth are good, it’s money in your retirement account that really matters.

And here it’s worth taking a hard look at the numbers…

Consider if you had invested $10,000 in the iShares MSCI South Korea Index (EWY) on the day of its launch back in May of 2000, versus investing the same $10,000 in the U.S. S&P 500.

Had you stuck with the tried and true advice of investing in a U.S. index fund, your $10,000 would be worth $9,360 today. Put the same $10,000 to work in the South Korea index fund, and you’d be sitting on an impressive $26,305. That’s an eye-popping 2.8x difference.

And how has South Korea performed since the markets bottomed back in March?

Quite well, thank you…

In fact, since I recommended the iShares MSCI South Korea Index (EWY) to subscribers in my monthly investment service, Global Stock Investor, it is up close to 20%.

It’s also the reason that I keep the bulk of my own money-management clients at my investment firm Global Guru Capital in foreign assets, including iShares MSCI South Korea Index (EWY) .

The Lesson Is…

Thanks to the explosion of exchange-traded funds (ETFs), you, too, can profit from the emergence of South Korea as the #1 Asian Tiger on the world’s economic stage, as well as the remarkable rise of other foreign economies and companies over the coming decades.
And today, it’s as simple and as easy as clicking on a mouse…

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