Last week the country of South Korea won the right to host the 2018 Winter Olympics, beating out two other competitors. The win was a big one for the country as they will be back at the top of the sports world in a few years from now.
While it was good for the country and its sports industry, it could also benefit a number of different sectors. From an investing standpoint I want to take a look at how the Olympics coming to South Korea could be a moneymaking opportunity. The obvious sectors that will benefit in the years heading up to a major event such as the Olympics would be infrastructure and materials. (For related reading, see Build Your Portfolio With Infrastructure Investments.) But there are also opportunities tied to tourism and the leisure sectors (hotels, restaurants, etc.).
TUTORIAL: Exchange-Traded Fund (ETF) Investing
South Korea ETFs
There are two ETFs that give investors broad based exposure to the country of South Korea and both are distinctively different. The most popular is the iShares South Korea ETF (NYSE:EWY), which has been around since 2000. The ETF is composed of 105 stocks based in South Korea and the top 10 is composed of some of the largest companies in the country.
About one-fourth of the ETF is composed of stocks in the information technology sector, followed by 19% in consumer discretionary, 17% in industrials and 16% in materials. One of the largest holdings is steel company POSCO (NYSE:PKX), a potential beneficiary of a boom in new buildings within the country. Shinhan Financial (NYSE:SHG) is also a top holding and could benefit from new lending for the new projects that must be undertaken to prepare for the games. The ETF charges an annual expense ratio of 0.61%.
Investors looking for more exposure to companies that rely on South Korea for sales should consider the IQ South Korea Small Cap ETF (NYSE:SKOR). The ETF is composed of 97 small cap stocks that are based in the country and charges an expense ratio of 0.79%. The ETF is heavily concentrated on the industrials with 34% of the allocation in the sector. Consumer discretionary makes up 16% and financials account for 15%, along with technology.
Due to its exposure to the small cap sector, the ETF will give investors the opportunity to invest in companies otherwise not available via US exchanges. The other factor that differentiates SKOR from EWY is that the stocks in SKOR are not the large multinationals that rely on other countries for revenue. A large portion of the stocks in SKOR generate their sales from within the borders of South Korea, which is a positive when playing the Olympics win.
South Korea Today
With the Olympics seven years away it may seem a bit early to invest in South Korea for that factor. I agree, but this is a country to keep an eye on in the next couple of years as the plans for the games begin to unfold.
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