South Korea's small caps outperform larger peers

SOUTH Korea's smaller companies are beating larger peers by the most since 2005 as President Park Geun Hye boosts stimulus and promotes entrepreneurship. The small-cap Kosdaq Index has advanced 15 per cent this year, outperforming the benchmark Kospi by 14 percentage points and beating the MSCI Emerging Markets Small Cap Index by 6.5 points till Monday. Mark Mobius, whose US$1 billion Templeton Asian Smaller Companies Fund topped 98 per cent of peers during the past five years, has been boosting holdings in South Korea and now has more than 30 per cent of his fund invested in the country.

While a stronger won and disappointing earnings have dragged down exporters such as Samsung Electronics Co, South Korea's small-cap companies are gaining from fiscal stimulus and Ms Park's push to level the playing field with conglomerates.

Growth in Asia's fourth largest economy will probably accelerate to 3.7 per cent this year from 3 per cent as government spending rises and lower interest rates support domestic demand, according to forecasts from the finance ministry.