Korean stocks luring investorsKorean stocks, Asia’s second cheapest, are attracting value investors including Warren Buffett, the world’s second-richest man.
“Korea is now cheap,” said Geoff Lewis, head of investment services JF Asset Management in Hong Kong. “We’re not necessarily following Buffett, but if the Sage of Omaha is buying Korea, some people are bound to do so as well.”
JF Asset, which manages $88 billion in Asia, has been buying more Korean shares in the past four to six weeks, Mr. Lewis said, declining to name them. It owns shares of Samsung Electronics Co., the world’s largest maker of computer-memory chips, and SK Telecom Co., Korea’s No. 1 mobile-phone operator.
Berkshire Hathaway Inc., run by billionaire Buffett, owns 4 percent of Korea’s Posco, the world’s third-largest steelmaker. Mr. Buffett’s annual letter to shareholders released March 1 revealed the stake, while Pohang-based Posco wasn’t listed among Berkshire’s holdings at the end of 2005.
Overseas investors, who were net sellers of $12 billion worth of Korean shares last year, have bought $1.3 billion more of the nation’s shares than they’ve sold so far this year. That’s the second most behind Japan of the eight Asian markets for which the data are tracked. A Merrill Lynch & Co. survey of fund managers last month found “the most notable shift” was a move away from Chinese stocks toward Korea and Taiwan.
Strategists at Merrill Lynch, Macquarie Securities, UBS AG and Deutsche Bank AG this month all said investors should buy Korean shares because of their low valuations.
Firms listed on the Kospi index sell on average for 13.3 times estimated profit, making it the cheapest benchmark in Asia after Thailand’s. MSCI’s Asia index is valued at 18.2 times.
“When global markets stabilize, Korean stocks are likely to outperform,” said Choi Min-jai, who helps manage about $1.4 billion at KTB Asset Management Co. in Seoul. “They are still cheap and the won currency will move positively for exporters.”
Merrill Lynch upgraded its opinion on Korean stocks to “overweight” from “neutral” in a March 2 note, on expectations of an economic recovery and increasing investment from overseas. Hyundai Mobis Co., Korea’s biggest auto-component maker, and Lotte Shopping Co., the country’s largest department-store operator, are among Merrill’s top picks.
Tim Rocks, strategist at Macquarie, said the Asian selloff will prompt international investors to reverse their bets that Korean shares will fall.
Young Chang of UBS named Samsung Electronics, Hyundai Motor and Hyundai Mobis as his top picks.
Mark Jolley, Deutsche Bank’s chief Asian strategist, recommends Korean stocks over shares from China, India and Indonesia.
Not all investors are convinced.
“The global macroeconomic picture is falling,” said Kim Seung-woo Kim, who manages about $400 million at Macquarie-IMM Investment Management Co. “That will continue to weigh on Korean shares,” he said.