Whereas political disaster looms massive over South Korea’s $1.6 trillion fairness market heading into 2025, the substitute intelligence growth and Donald Trump’s presidency stay key components for inventory pickers.
The continuing “Company Worth-Up” marketing campaign is one other prime theme in what is likely one of the world’s worst-performing inventory markets. Firms proceed to get on board with the plan’s reforms, although a botched martial regulation decree and impeachment proceedings towards the nation’s president have solid doubt over the political impetus.
The benchmark Kospi is on target for its longest month-to-month dropping streak since 2008, with world traders accelerating withdrawals. The index is down greater than 8% on the 12 months, in contrast with an 18% achieve in an MSCI Inc. gauge of worldwide equities.
Although referred to as a tech-dominated market, Korean benchmarks have been weighed down by a 32% slide in heavyweight Samsung Electronics Co. as a consequence of its missteps in AI. In the meantime Trump’s second time period will increase tariff threats over tech exports and clouds the outlook for electric-vehicle demand.
Buyers say Korean shares will proceed to wrestle in coming months whereas the Constitutional Court docket deliberates the impeachment of President Yoon Suk Yeol. On the similar time, China’s massive stimulus plans threaten to steal investor money flows away from South Korea.
There are brilliant spots available in the market, nonetheless, with the AI and governance enchancment themes persevering with to mint choose winners. Total, the cheapness of Korean shares could present some attraction as effectively.
“Extreme pessimism is what we’re seeing available in the market proper now,” mentioned Yi Ping Liao, assistant portfolio supervisor at Franklin Templeton Rising Markets Fairness. “Whereas the financial and earnings outlook is on the weak facet, we do have various valuation cushion,” and this in flip creates bottom-up alternatives, she mentioned.
Listed here are the main winners and losers within the South Korean inventory market in 2024.
Winner: Energy Gear
Energy tools suppliers have been among the many largest gainers in rising markets this 12 months, as traders wager that electrical energy demand from AI information facilities will set off demand for brand spanking new and upgraded gear at world grids. HD Hyundai Electrical Co., which makes transformers and mills, topped the Kospi with a achieve of greater than 370% this 12 months.
Winner: Noodle Maker
One other star this 12 months was Samyang Meals Co., whose shares jumped greater than 250% on surging demand for its spicy buldak noodles within the US and elsewhere helped by a viral TikTok video.
There’s nonetheless “affordable upside” in Samyang Meals, in keeping with Kim Doo-Yong, chief government officer at Should Asset Administration. The inventory contributed probably the most to the 50% achieve Kim’s flagship fund posted this 12 months, and he stays a holder. For 2025, he can be targeted on discovering about 20 such “diamond-like” shares that may outperform.
“When the general market isn’t enticing, the eye and the stream gravitate towards a number of enticing shares,” Kim mentioned.
Winner: Banks
Korean banks are headed for his or her finest 12 months since 2017 on expectations they are going to reply extra rapidly and actively to the federal government’s company reform drive and increase shareholder returns. Sector chief KB Monetary Group Inc. is up practically 60% this 12 months, poised for its finest annual efficiency since 2009.
Loser: Samsung
Samsung’s inventory is on observe for its worst 12 months since 2000, amid rising doubts over its technological management after it fell behind in making reminiscence chips to work with AI processors. International traders have bought about $7 billion value of the inventory in 2024, on a internet foundation.
South Korea’s largest firm had signaled progress on efforts to produce its most superior chips to Nvidia Corp. two months in the past, however investor hopes have receded additional since then. In the meantime, Samsung’s woes have been excellent news for rival SK Hynix Inc., whose shares have gained greater than 20% this 12 months on pleasure for its AI merchandise.
Loser: EV Batteries
It was a depressing 12 months for South Korea’s EV battery suppliers, a sector as soon as beloved by the nation’s retail traders. Bigger shares that commerce on the theme together with Samsung SDI Co., Posco Holdings Inc. and LG Chem Ltd. have dropped round 50%, whereas smaller Ecopro BM Co. has tanked greater than 60%.
The group has been hit by weak demand outdoors of China in addition to Trump’s vow to repeal the US Inflation Discount Act, which gives credit for EV purchases. The outlook could enhance subsequent 12 months on EU emissions coverage, extra reasonably priced fashions and indicators of business consolidation and development, mentioned Franklin Templeton’s Liao.
Whereas it’s tough to say the Korean EV battery sector is on the backside, “we may be shut,” she mentioned.
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