JPMorgan Buys South Korean Stocks Saying Won Concerns Overblown

Jan 08, 2014 8:12 am ET

Jan. 8 (Bloomberg) -- JPMorgan Asset Management has been buying South Korean electronics and auto stocks in recent weeks, saying concern that the won’s strength will erode exports is overblown after valuations fell to eight-year lows.

“We have been adding into weakness,” Grace Tam, a Hong Kong-based global market strategist at JPMorgan Asset, which oversees about $1.5 trillion, said by phone yesterday. She declined to name specific stocks. “People worry about the competitiveness of Korean exports. We think this is overdone.”

The Kospi index has dropped 4.8 percent from last year’s high on Oct. 30 as the won strengthened 6 percent against the yen. The benchmark index’s valuation fell to about the same level as its companies’ net assets last week, a 50 percent discount versus the MSCI All-Country World Index, the widest gap since July 2005. Samsung Electronics Co., the world’s biggest maker of handsets and televisions, has slumped 14 percent while Hyundai Motor Co. and Kia Motors Corp., South Korea’s largest automakers, fell at least 10 percent.

Bank of Korea Governor Kim Choong Soo may lower the nation’s benchmark interest rate by a quarter-percentage point as early as tomorrow to mitigate the won’s gains and spur growth, according to Goldman Sachs Group Inc. Hyundai Motor and Kia Motors predicted the slowest growth in combined deliveries since 2006 on Jan. 2, while Samsung Electronics posted its first profit decline in nine quarters yesterday.

Global Outlook

International investors sold a net $2.3 billion of Kospi shares since the end of October, snapping a record stretch of inflows into Asia’s fourth-largest economy. The Kospi was little changed at 1,959.61 as of 12:35 p.m. local time. Samsung Electronics slipped 0.8 percent, while Hyundai Motor climbed 0.4 percent. The two stocks comprise more than 20 percent of the Kospi’s weighting.

Improving growth in advanced economies including the U.S. will give South Korean exporters a boost in coming months, Tam said. The International Monetary Fund plans to raise its global growth forecast in coming weeks, Christine Lagarde, the fund’s managing director, told reporters in Nairobi yesterday.

“The Korean market is still very cheap,” Tam said. “Recent declines gave us good entry points.”

--With assistance from Kyoungwha Kim in Singapore. Editors: Michael Patterson, Richard Frost