South Korea, Taiwan Stocks Bounce On China Hopes (Investor's Business Daily)

September 9, 2015


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Asian stock markets, led by South Korea and Taiwan, roared ahead Wednesday on speculation China will offer more stimulus in an effort to boost its sagging stock market and economy.

That would help some of its closest trading partners.

The South Korean KOSPI index rose 3%. The Taiwan Stock Exchange Weighted Index rose 3.6%. That gave a boost during Wednesday’s regular session to ETFs that track South Korean and Taiwanese indexes.

IShares MSCI Taiwan (ARCA: EWT) and iShares MSCI South Korea (ARCA: EWY) gapped up when U.S. markets opened. Both closed up more than 1%, but off session highs.

Both are down year to date. Global markets were staggered by China’s August sell-off.

The Shanghai Composite rose 2.3% overnight as upside volume picked up from the day before.

But the index is still 37% off its high.

Samsung Electronics is by far the South Korean ETF’s biggest holding, representing 20.6% of the weighting compared with the No. 2 holding, carmaker Hyundai, at 4.2%.

Samsung is a huge South Korean conglomerate. Products made by its electronics company are well known to U.S. consumers. They include home appliances, cameras and camcorders, computers, home audio and televisions and cellphones, including the Galaxy S line of smartphones.

The stock last touched a high in January 2013 and, despite the positive action the past three weeks, is still in a downtrend.

Samsung Electronics has a five-year annualized EPS growth rate of 18%, but has had five straight quarters of declining year-over-year growth. Analysts expect a 10% decline this year and 6% growth in 2016.

Like Samsung, the Taiwanese ETF is dominated by a single well-known name, Taiwan Semiconductor (NYSE: TSM), which also trades as an ADR on the NYSE. It represents 22.4% of the ETF .

Taiwan Semiconductor makes chips for companies that design chips and sell them under their own brand names. Top customers include Qualcomm (NASDAQ: QCOM), Advanced Micro Devices (NASDAQ: AMD), Nvidia (NASDAQ: NVDA) and Broadcom (NASDAQ: BRCM). Its chips are found in iPhones.

Chip stocks have not been top performers. The semiconductor manufacturing industry group was rated No. 158 out of 197 based on six-month performance in Wednesday’s IBD.

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