JPMorgan Asset Management has been buying many South Korean automobile and electronics stocks since December, saying that concern about the Korean Won’s strength is overblown. The Won rose 17% against the U.S. dollar since June of 2013, leading some to predict that the country will face declining exports.
“We have been adding into weakness,” said Grace Tam, a global market strategist at JPMorgan Asset. “People worry about the competitiveness of Korean exports. We think this is overdone.”
The Kospi index, which reached its 2013 highs in October, has since slumped by 4.9% as international investors sold a net US$2.2 billion of shares. Samsung Electronics Co. (KRX: 005930), the world’s largest manufacturer of televisions, fell by 14%, while Kia Motors Corp (KRX: 000270) and Hyundai Motor Co. (005380), Korea’s largest automobile manufacturers fell by over 12%.
Emerging market equities performed poorly in 2013 as they trailed those from developed countries by the most since 1998. However, JPMorgan and some other analysts see this as a buying opportunity.
“The Korean market is still very cheap,” Tam said. “Recent declines gave us good entry points.”