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Foreign investors keep cool over Korea crisis
Reuters - Wednesday, November 24
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* Fund managers brush off Korea concerns
* Watching closely for escalation
By Chris Vellacott
LONDON, Nov 23 - North Korea's shelling of an island belonging to its southern neighbour on Tuesday has not rattled foreign investors who are sticking to their investments in South Korea for now, fund managers said.
Many mutual funds hold shares in South Korean blue chip companies such as Samsung Electronics <005930.KS> and Hyundai Motor <005380.KS>, and the latest escalation of tensions prompted fears foreign investors would rush for the exits. [ID:nL3E6MN0SQ]
"Unless there is significant escalation from here on inwards I don't think this is something that is going to have a major sustained impact on the markets," said Brian Coulton, global emerging markets strategist at British investment manager Legal & General Investments.
Investors argue that the incident, though alarming, is nonetheless characteristic of relations between the two rivals.
"There are periodically these sorts of hiccups in relations. This is more severe than the norm perhaps, but we're not unduly worried about it," said Allan Conway, head of global emerging markets at British investment manager Schroders <SDR.L>.
"Korea remains an attractive market and we are overweight in Korea. If you are investing in Korea you've got to live with the fact there is always potential for incidents to occur between the two sides. It goes with the territory," he said.
The crisis weighed on global markets which were already reeling on Tuesday from concerns that a rescue package for Ireland may not halt contagion of the country's woes to other European economies. [ID:nLDE6AM1AL]
But while long term investors said they are not rethinking their Korean strategies yet, they acknowledged they are watching closely for signs of further escalation.
"In the past, these crises have normally provided good buying opportunities in Korea. The question here is will this turn out to be a normal crisis or one on an entirely different scale," said Julian Mayo, Co-Chief Investment Officer, Charlemagne Capital.
One fund manager said the events served as a reminder investment in emerging markets including Korea is inherently more risky than exposure to more developed economies.
"It is a reminder these economies not only go through economic growing pains, but also go through political growing pains," said Peter Dalgleish, an Asia Pacific fund manager at F&C Asset Management <FCAM.L>.
(Reporting by Chris Vellacott, editing by Sinead Cruise and David Cowell)
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