Morningstar called Korean stocks the best bet in Asia and emerging markets

Morningstar Wealth is selling off Chinese and Japanese stocks to increase its investments in South Korean companies. It expects the Korean stock market to deliver the best returns among emerging markets and Asia over the next decade. The main drivers are technology stocks associated with the artificial intelligence boom and the will of the country's new leadership to implement corporate reforms in the interests of minority shareholders.

Morningstar Wealth senior portfolio manager Mark Preskett is exiting Chinese and Japanese stocks and increasing his exposure to South Korean assets. He is attracted to tech stocks involved in the AI boom and the political will of the country's new leadership for corporate reform. The fund manager expects Korea to provide him with the best reward among developing and Asian countries over the next decade. He is betting on annualized returns of 11-12% in dollars for South Korean stocks over the next ten years, writes Bloomberg.

The new U.S. duties are not causing Preskett to worry. Despite Donald Trump's statement about imposing 25 percent rates on Korean imports, the head of investment fund Morningstar is confident that the countries will sign "some kind of agreement" in the next two weeks. He also noted that the lack of tightening of already existing duties on cars and the exclusion of electronics from the new restrictions play into the hands of the Korean market. 

«Корея занимает лидирующие позиции по ожидаемой доходности, — заявил Прескетт в Лондоне. - We see this as the start of a reassessment process." He's betting on SK Hynix and Samsung Electronics, the market leaders in high-speed memory chips needed for AI. In his view, their shares are undervalued by the market. 

He is particularly hopeful about the Value-Up program aimed at legislating corporate reforms. Last week's amendments to the Korean Commercial Code, passed by parliament, will help address long-standing problems with minority rights and the outsized influence of family chaebols, according to Preskett. The stability of the political environment after the country's leadership change and a concerted effort to reduce the "Korean discount" make this market increasingly interesting - especially against the backdrop of a stagnant China, the portfolio manager said.

«Мы видим у Кореи сопоставимую привлекательность с точки зрения оценок, но фундаментальные показатели выглядят сильнее, — отметил он. - There is no looming threat from the real estate market here and there are no questions about corporate governance and shareholder rights."

The Ninety One Global Strategy Asian equities fund, which outperforms 94% of its peers, recently increased its exposure to Samsung shares in the portfolio. According to fund co-manager Charlie Linton, many investors are "mispricing" Samsung because of its lagging behind SK Hynix, the main supplier of high-speed memory chips to Nvidia. «Сейчас все недооценивают Samsung, — заявил Линтон, который также владеет акциями SK Hynix. - "We have taken a more positive stance in part because the valuation looks very attractive.

Fidelity portfolio manager Ian Samson cut his stake in Japan and moved funds into Korean stocks in late May - shortly before South Korea's snap presidential election, which was won by the opposition leader. «Удивительно, как быстро и сильно вырос рынок, — говорил Сэмсон в интервью Bloomberg неделю назад. - "But if you look at current valuations, especially given the positive economic momentum, there's no reason why Korean stocks couldn't rise even more.

Despite domestic political turmoil and a 25 percent duty on U.S. exports, the outlook for the Korean market remains "quite favorable," Yuanta Securities global strategist Daniel Yoo agrees, he is quoted by CNBC. That said Korean exporters are better able to cope with the new restrictions, as much of the price increase is likely to be borne by U.S. consumers, according to Manishi Raichowdhury, head of Emmer Capital Partners.

South Korea has seen an impressive recovery, with its KOSPI index up more than 30 percent since the beginning of the year, leading the region, CNBC writes. With the return of global funds, there is growing optimism that Korean regulators will continue to implement changes to improve corporate governance, a factor that has historically held back the local stock market, notes Bloomberg.

This article was AI-translated and verified by a human editor