A dark cloud of political uncertainty hangs over South Korea with the impending impeachment of President Park Geun-hye, but the nation’s export-oriented economy offers some stability. Although high household debt is dampening domestic demand, that is offset by global appetite for South Korea’s competitive, market-leading consumer products.

South Korea’s political troubles are the result of allegations that Park’s confidante, Choi Soon-sil, exchanged political favours for donations from chaebols, the country’s family-run conglomerates.

The chaebols – including Lotte Co. Ltd., which runs a host of businesses, from candy making to heavy manufacturing and electronics – have long been a source of public and investor discontent because these firms favour increasing market share over maximizing value for minority shareholders.

This trend has resulted in lower stock valuations, says Richard Wong, vice president and portfolio manager with Mackenzie Financial Corp. in Toronto. As a result, many investors focus on globally competitive industries, such as computer memory-chip makers Samsung Electronics Co. Ltd. and SK Hynix Inc.

“We generally shy away from more domestic-oriented sectors,” says Greg Gipson, senior vice president and head of portfolio management, systematic investments, with BMO Global Asset Management Inc. in Toronto. “We’re looking for companies that are more linked to the global economy.”

That’s also the approach of Christine Tan, chief investment officer and senior portfolio manager with Excel Investment Counsel Inc. in Mississauga, Ont.: “Our focus is more on the global consumer, as opposed to the domestic Korean economy.”

However, says Mayur Nallamala, head of Asian equities and senior portfolio manager with RBC Global Asset Management Inc. in Hong Kong, “the underlying economy continues to operate more or less as normal, and there are investment opportunities in the Korean stock market.”

These include Naver Corp., South Korea’s answer to Google. With an eye toward global expansion, Nallamala says, Naver has “proven its capabilities” through the development of new social media platforms such as Snow – Asia’s version of Snapchat.

Eileen Dibb, portfolio manager with Fidelity Institutional Asset Management in Boston, sees strength in holding shares of NCSoft Corp., developer of digital games. Its ability to churn out new games and franchises of its signature brands, coupled with the shift from desktop to mobile devices, has made NCSoft a company to watch.

There also are some regional plays. For example, Tan notes, Chinese women’s fascination with South Korean pop culture translates into a boost in cosmetic sales for LG Household & Health Care Ltd.

Still, investors’ attention is focused on exporters. Wong notes that Samsung is not only a “global leader” in memory chips, it’s expanding into Internet-controlled appliances such as washing machines. He thinks Samsung could be dominant in this space.

Tan adds that Samsung has “led the way” in being more shareholder-friendly with its “sizable” share buybacks and corporate restructuring. She notes that the blowback from Samsung’s exploding Galaxy Note 7 smartphone could have soured investors’ confidence, but “decisive” handling of the recall redeemed Samsung’s reputation.

SK Hynix, second in class in the memory-chip business and an Apple Inc. supplier, is jockeying for a bite of Samsung’s market share in this space. Gipson says SK Hynix stands to benefit from technology firms’ interest in NAND Flash – faster memory chips that can store much more data.

Traditional heavyweight Hyundai Motor Co. has taken a beating this year. Low oil prices have hurt small-car manufacturers, with consumers shifting to SUVs and trucks from smaller vehicles, Dibb says.

Pohang Iron and Steel Co. (POSCO), on the other hand, has weathered the downturn in demand in the face of a glut in steel supply from China, Wong says. POSCO trimmed and restructured “non-core” units and affiliates and now focuses on producing high-grade steel to improve its bottom line and create shareholder value.

© 2017 Investment Executive. All rights reserved.