Fund Manager Beating 97% of Peers Buys Korean Tech Stocks

(Bloomberg) -- A top-performing fund manager is betting that South Korea’s technology stocks still have room to shine in an equity market that has surged more than 90% since the initial impact of the pandemic in March.

Soohai Lim, a fund manager for Barings in Hong Kong, said strong earnings growth, attractive valuations and a positive trend for chip prices bode well for the country’s equities. In addition, the shares have the right mix of growth and cyclical characteristics. He has added more Korean tech names to the Barings Asia Growth Fund, which beat 97% of its peers over the past year.

“Korea is definitely interesting,” said Lim, who oversees the $182 million fund. “We continue to find a lot of interesting ideas in technology space.”

South Korea’s leading tech shares, including certain memory firms, have structural growth that has been under-priced, according to Lim. The cyclicality of the sector is also “a nice attribute” amid the recent shift of investors toward shares that are more sensitive to the economy, he said.

Nomura Holdings Inc. also holds a favorable view of Korean stocks. The nation has the perfect example of a so-called barbell market, with a mix of stocks that are geared to long-term structural “mega-trends” and those that are deeply cyclical, the firm’s strategists wrote in a research report last week.

South Korea’s benchmark index has climbed 90% since hitting its pandemic low in the middle of March. The stock market attracted $4.2 billion net buying from foreign investors so far this quarter, set to end six quarters of outflows, according to data compiled by Bloomberg.

While the shift toward value shares left Barings’ Lim “disappointed” about the fund’s performance in the past month, he said that such a rotation is needed for the market to keep climbing. His fund returned 49% in the past year.

“It’s healthy,” said Lim, who sees further upside for Asian equities next year on earnings growth and accommodative monetary policies. “You definitely need to see more sectors beyond the growth stocks to participate in the rally so that the breadth overall could be broadened.”

The MSCI Asia Pacific Index advanced 0.1% on Monday, set for a new record high. Korean technology giant Samsung Electronics Co. was among the stocks
contributing most to gains in Asia’s benchmark.

©2020 Bloomberg L.P.