Global financial services company Credit Suisse has upgraded South Korean equities to “overweight” from “neutral,” saying that the influence of the trade war between the United States and China on the South Korean stock market is on the wane.
“South Korea placed third in our ranking of Asian countries last month but it moved two notches up to the No. 1 spot this month,” said Dan Fineman, co-head of equity strategy for the Asia Pacific region at Credit Suisse, in a report on the Asian market strategy.
He added, “South Korea has moved to the top of Credit Suisse’s country scorecard on improving tech outlook and reduced sensitivity to global currency movement.”
Credit Suisse expected that the South Korean stock market would see a big turnaround. Fineman said, “The South Korean market will extricate its earning per share (EPS) from rock bottom this year and show the biggest improvement among Asian countries next year. The value of South Korea can gradually rise as next year’s performance is reflected in key evaluation indexes.”
In particular, an improvement in the outlook for tech and semiconductor companies will lead to rosy views on the South Korean stock market.
He added that the data center conversion related to 5G and the improvement in memory inventories is improving the prospects for the DRAM and semiconductor industry.
Senior Credit Suisse researcher Park Ji-hoon also said, “I believe that the decline in South Korea’s EPS will end soon with the improvement in earnings of memory, refining and chemical companies.”
In addition, he stressed that the trade war between the United States and China has less influence on the South Korean stock market than before.
Fineman said, “Exports in the Asian region have not rebounded yet but the decreasing rate has already hit rock bottom. The GDP figure for the stock market in the North Asian region was also fairly stable in the second quarter.”