How To Trade Korea On +13.7% Factory Output (LPL, EWY)

South Korean stocks rose sharply during Thursday trading in Seoul on news that the country's factory output had surged higher in January. The export-driven economy's factory output climbed 4.6% above the previous month's level and 13.7% above the January 2010 level. The growth looks set to continue as it was also reported that South Korea's February exports were 17.9% higher than the same month a year earlier.

South Korea's rising factory output is being fueled by increasing demand from the country's export markets. As these economies continue to improve, consumers are making purchases that they had been putting off during the recession.

Although the market has reacted positively, the greater than expected growth in the Korean economy has also led to inflationary fears. February's consumer prices were 4.5% higher than a year earlier, which was also above the South Korean central bank's maximum target of a 4% increase.

While this has led to concerns over possible interest rate hikes, the central bank may be slow to act because rising oil prices and unrest in Libya, Egypt and other countries in North Africa and the Middle East could be of greater concern.

During Thursday trading in Seoul, investors were more impressed with the growing economy than they were worried about inflation. The Korea Composite Stock Price Index, or KOSPI, ended the trading day up 42.42 points, or 2.20% at 1,970.66.

LG Display Co, Ltd (NYSE: LPL) is a South Korean company that could benefit from increasing demand for Korean products. The company is a leading manufacturer and supplier of thin-film transistor liquid crystal display (TFT-LCD) panels, OLEDs and flexible displays used in TVs, monitors, notebook PCs, mobile products and other various applications. The company's shares trade as ADRs on the New York Stock Exchange.

Investors who feel that Korea's stock market will continue to climb and are interested in investing in the broader market should consider the iShares MSCI South Korea Index (NYSE: EWY). The ETF seeks to provide investment results that correspond generally to the price and yield performance of publicly traded securities in the South Korean markets, as measured by the MSCI South Korea index.