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Business Times
6 hours ago
- Business
- Business Times
Global funds bet on South Korean stocks' big break on reform tailwinds
After years of frustration with South Korea's underperforming stock market, investors are growing more optimistic that the new president's push for shareholder-friendly policies will finally deliver stronger returns. Global money managers, including Aberdeen Investments, Pictet Wealth Management, and Franklin Templeton, have recently added positions or upgraded their outlook on local stocks. They are encouraged by newly-elected Lee Jae-myung's vows to boost corporate governance and nearly double the market's return, after months of political chaos in the nation triggered by his predecessor's short-lived martial law imposition. Foreigners are returning to the stock market, helping to push the benchmark Kospi Index into a bull market on Lee's first day in office. The early euphoria suggests investors are confident that Lee will accelerate efforts to boost shareholder returns – reminiscent of a similar drive that unleashed a stock rally in Japan – and succeed in the passage of a commercial law revision aimed at improving corporate governance. 'We are starting to see early signs of change,' said Pruksa Iamthongthong, deputy head of Apac equities at Aberdeen Investments, whose US$1.2 billion Asian ex-Japan fund turned overweight on South Korean stocks in May. 'We believe that such a collective effort on the part of the government and domestic companies will go a long way in boosting trust in Korea's capital markets and creating a culture of a greater heed to shareholder value.' Agitated investors South Korea's economy is dominated by family-controlled conglomerates, known as chaebols, which have come under criticism for failing to protect the rights of minority shareholders. That's resulted in investors often pricing local stocks below their book value and lower than overseas rivals, a phenomenon known as the 'Korea discount'. Shareholders are getting increasingly agitated, with activism campaigns targeting companies rising by seven-fold between 2020 and 2024, according to Bloomberg Intelligence. BT in your inbox Start and end each day with the latest news stories and analyses delivered straight to your inbox. Sign Up Sign Up 'That link between what a company earns and what minority shareholders get back was broken,' said Jon Jhun, managing director at Management HK Advisors in Hong Kong. It's 'about to be fixed by the Democratic Party and their legislation'. One of Lee's early priorities is to root out rubber-stamping directors by revising the commercial code to broaden board fiduciary duty to shareholders – and not just to the company itself. The ruling party's officials are proposing new revisions, which include enhancing the nomination process for audit committee members and adopting electronic voting systems. Such revisions largely target chaebol conglomerates and their founding families, who wield outsized influence in the economy and at listed companies' management and boards. The new political leadership will likely look to further galvanise a wave of changes that were put in motion more than a year ago, in a programme called the 'Corporate Value-up'. Modelled after Japan's 'name and shame' initiatives, the programme urges companies to self-start a range of measures to boost shareholder returns. A total of 160 companies have unveiled Value-up plans, though many lacked details, said John Cho, South Korea equity portfolio manager at JPMorgan Asset Management. 'We anticipate that future iterations of medium-term planning should lead to more refined Value Up plans,' Cho said. 'Korea is only in its second year of the Value Up plan, compared to Japan's decade-long governance journey.' Signs are emerging that companies are taking proactive measures. Kospi members' total dividend payouts rose 12 per cent in 2024 to 44 trillion won (S$42 billion), according to Korea Exchange's data. Share buybacks more than doubled to 18.7 trillion won in 2024. 'These chaebols are actually changing their plans due to the pressure from the government and from the market,' said Yiping Liao, a portfolio manager at Franklin Templeton Emerging Markets Equity, which has been selectively adding South Korean stocks before the election. Earlier this year, arms maker Hanwha Aerospace also cut the size of a share offering after backlash from investors who were concerned about value dilution. Even with the legislature largely in his corner, Lee is not taking on his agenda without challenges. Some investors and activists have called for revising taxes on inheritance and dividends to help lift stocks, but that would require broader public support. The new president will also have to juggle a host of issues that darken the country's outlook, such as the prospect of higher tariffs from the US, an economy in contraction, and a deep-seated polarisation. Still, a corporate culture shift is underway, said Jonathan Pines, lead portfolio manager and head of Asia ex-Japan at Federated Hermes. 'We are significantly overweight Korean equities because of low valuations, and in the hope that the landscape continues to improve,' he said. BLOOMBERG
Bloomberg
17 hours ago
- Business
- Bloomberg
Global Funds Bet on Korean Stocks' Big Break on Reform Tailwinds
After years of frustration with South Korea's underperforming stock market, investors are growing more optimistic that the new president's push for shareholder-friendly policies will finally deliver stronger returns. Global money managers, including Aberdeen Investments, Pictet Wealth Management, and Franklin Templeton, have recently added positions or upgraded their outlook on local stocks. They are encouraged by newly-elected Lee Jae-myung's vows to boost corporate governance and nearly double the market's return, after months of political chaos in the nation triggered by his predecessor's short-lived martial law imposition.
Bloomberg
03-04-2025
- Business
- Bloomberg
Underweight US High-Yield: Renaud-Chatelain
Laureline Renaud-Chatelain, Fixed Income Senior Strategist at Pictet Wealth Management, discusses her expectations for inflation, divergence between the US and European bond markets, and investing in TIPS and gold as safe havens. She speaks to Bloomberg's Guy Johnson, Anna Edward and Kriti Gupta on 'The Opening Trade.' (Source: Bloomberg)
Yahoo
27-02-2025
- Business
- Yahoo
Global shares to keep rising, say strategists unbothered by trade ructions: Reuters poll
LONDON (Reuters) - Stock market strategists are sticking to their positive view on the performance of global equity markets, expecting solid gains in even the most beaten-down indexes in India and Japan, according to the latest quarterly Reuters polls. The United States under President Donald Trump threatening to impose tariffs on its traditional allies and appearing to take Russia's side in the three-year war with Ukraine does not appear to have shaken their resolve. Slightly more than half of the strategists - 48 of 86 - at banks and brokerages polled by Reuters on February 13-25 expected a correction in their local market in the coming three months, roughly the same proportion compared with a November survey, suggesting the overall risk outlook has not changed much. "There is an inherent paradox between this very high level of uncertainty we have on a number of metrics and the fact stock markets seem to be still doing well," said Frederik Ducrozet, head of macroeconomic research at Pictet Wealth Management. "Large broad-based tariffs are not priced in. The first reason is obviously the market assumption Trump is using those tariffs as first and foremost a negotiation tool, a leverage to extract concession from countries. The other is despite all his threats, we have not yet seen any actual implementation of tariffs." About 60% of strategists - 50 of 84 - covering 15 major equity indexes, said corporate earnings would grow slower in their local markets in 2025 than last year on rising political and economic risks. They still forecast solid gains for the rest of the year. Prospects for widespread deregulation and tax cuts in the U.S. have strategists still expecting the Standard & Poor's 500 index to gain more than 10% this year, on the heels of the more than 50% racked up over the past two alone. Those predictions come even as bond markets have started showing signs of concern about a U.S. economic slowdown before Trump's tariffs - he has proposed some of the most hefty levies since the 1930s Great Depression - take effect. The price of safe-haven gold has also repeatedly hit record highs, usually a sign of investor caution. Inflation worries have kept the Federal Reserve on pause with interest rates although futures markets expect two more cuts this year, and several more from the European Central Bank, grappling with a weaker economy. Yet shares on Europe's top bourses, such as Germany's DAX, and shares listed on Hong Kong's Hang Seng index have been the runaway winners so far this year, with more than double-digit gains, a clear break from the trend before the U.S. presidential election in November. Strategists appear to view the Europe rally as mostly over, with only very slim gains or none between now and year-end. Forecasters see Canadian stocks climbing higher, suggesting they are yet to completely price in risks from a potential trade war with the U.S., historically close allies. Even Mexico, at great risk of economic damage if hefty tariffs are not avoided, is expected to clock a 15% gain on its main stock index this year. The battered Indian blue-chip Nifty 50 and Japan's Nikkei indices were also expected to recover this year. Cross-asset analysts at Morgan Stanley said this week that current drivers of stock markets "are often contradictory across regions." "Stretched U.S. valuations stand out, but EM (emerging market) and European stocks are now also richer than historical averages," they said. "S&P 500 has richened on U.S. exceptionalism, Europe on hopes of lower geopolitical risk premium, EM on optimism over China. The probability these all hold true is low." (Other stories from the Reuters Q1 global stock markets poll package) Sign in to access your portfolio
Reuters
27-02-2025
- Business
- Reuters
Global shares to keep rising, say strategists unbothered by trade ructions
LONDON, Feb 27 (Reuters) - Stock market strategists are sticking to their positive view on the performance of global equity markets, expecting solid gains in even the most beaten-down indexes in India and Japan, according to the latest quarterly Reuters polls. The United States under President Donald Trump threatening to impose tariffs on its traditional allies and appearing to take Russia's side in the three-year war with Ukraine does not appear to have shaken their resolve. Slightly more than half of the strategists - 48 of 86 - at banks and brokerages polled by Reuters on February 13-25 expected a correction in their local market in the coming three months, roughly the same proportion compared with a November survey, suggesting the overall risk outlook has not changed much. "There is an inherent paradox between this very high level of uncertainty we have on a number of metrics and the fact stock markets seem to be still doing well," said Frederik Ducrozet, head of macroeconomic research at Pictet Wealth Management. "Large broad-based tariffs are not priced in. The first reason is obviously the market assumption Trump is using those tariffs as first and foremost a negotiation tool, a leverage to extract concession from countries. The other is despite all his threats, we have not yet seen any actual implementation of tariffs." About 60% of strategists - 50 of 84 - covering 15 major equity indexes, said corporate earnings would grow slower in their local markets in 2025 than last year on rising political and economic risks. They still forecast solid gains for the rest of the year. Prospects for widespread deregulation and tax cuts in the U.S. have strategists still expecting the Standard & Poor's 500 index (.SPX), opens new tab to gain more than 10% this year, on the heels of the more than 50% racked up over the past two alone. Those predictions come even as bond markets have started showing signs of concern about a U.S. economic slowdown before Trump's tariffs - he has proposed some of the most hefty levies since the 1930s Great Depression - take effect. The price of safe-haven gold has also repeatedly hit record highs, usually a sign of investor caution. Inflation worries have kept the Federal Reserve on pause with interest rates although futures markets expect two more cuts this year, and several more from the European Central Bank, grappling with a weaker economy. Yet shares on Europe's top bourses, such as Germany's DAX (.DAX), opens new tab, and shares listed on Hong Kong's Hang Seng index (.HSI), opens new tab have been the runaway winners so far this year, with more than double-digit gains, a clear break from the trend before the U.S. presidential election in November. Strategists appear to view the Europe (.STOXX), opens new tab rally as mostly over, with only very slim gains or none between now and year-end. Forecasters see Canadian stocks (.GSPTSE), opens new tab climbing higher, suggesting they are yet to completely price in risks from a potential trade war with the U.S., historically close allies. Even Mexico (.MXX), opens new tab, at great risk of economic damage if hefty tariffs are not avoided, is expected to clock a 15% gain on its main stock index this year. The battered Indian blue-chip Nifty 50 (.NSEI), opens new tab and Japan's Nikkei (.N225), opens new tab indices were also expected to recover this year. Cross-asset analysts at Morgan Stanley said this week that current drivers of stock markets "are often contradictory across regions." "Stretched U.S. valuations stand out, but EM (emerging market) and European stocks are now also richer than historical averages," they said. "S&P 500 has richened on U.S. exceptionalism, Europe on hopes of lower geopolitical risk premium, EM on optimism over China. The probability these all hold true is low." (Other stories from the Reuters Q1 global stock markets poll package) Get a look at the day ahead in U.S. and global markets with the Morning Bid U.S. newsletter. Sign up here.
