S. Korean fund sees opportunity in stocks hit by trade war

SEOUL: South Korean stocks are being unfairly sold off alongside their Chinese counterparts on investor concerns about the ongoing trade war, but that has created a buying opportunity and the trend should eventually reverse, according to a local fund manager.

Hanwha Asset Management, which oversees about 95 trillion won (RM351.61 billion), has highlighted a number of exporters most hit by the United StatesChina trade war, including display maker LG Display Co and chip manufacturers Samsung Electronics Co and SK Hynix Inc

It sees the potential for South Korean firms to profit from the dispute over time, and take market share from Chinese peers.

“That’s the only way we could probably survive,” said Lee Junhyuck, a managing director at Hanwha here.

If the trade war drags down China’s economy, and other regions grow faster as a result, “South Korea has the chance to export more to those regions,” he said.

In addition, South Korean companies may benefit should US efforts to stop the alleged theft of intellectual property, particularly in memory chips, make it more difficult for Chinese technology firms to compete with global peers.

US security concerns about China-made equipment have already helped boost shares of South Korea’s Hanwha Aerospace Co, an aircraft parts manufacturing company, a note from Shinhan Financial Investmentsaid on Wednesday.

To be sure, not all South Korean stocks will benefit, according to Lee. Domestic equipment-makers as well as tourism and consumer shares tied to the spending of Chinese tourists will continue to suffer from the trade war, he said.

South Korean assets have tracked the slump in China’s this year thanks to their regional proximity and the South Korean economy’s reliance on exports.

The Kospi Index has fallen 16 per cent, just behind the 20 per cent slump in the Shanghai Composite Index.

The won has dropped over five per cent against the dollar this year, compared with a six per cent decline in the offshore yuan.

Lee doesn’t expect a quick turnaround on his investments, seeing uncertainties persisting into next year.

US tariffs on Chinese goods could boost volatility in consumer prices, leading to faster Federal Reserve rate hikes and tighter liquidity, he said.