Fund manager Arjun Jayaraman said South Korea’s recent political turmoil appeared to be short-lived, saying there were opportunities for investors in the country.
A portfolio manager at US investment firm Causeway Capital Management added that risks to South Korea’s stock market have now been priced in, following President Yoon Suk Yeol’s failed attempt to impose martial law in early December. Impeachment followed on Saturday.
“We think South Korea is obviously a pretty cheap market. Its prices reflect a lot of negative factors,” Jayaraman told CNBC’s “Squawk Box Asia” last week. “The value there is certainly attractive, Therefore, we maintain our overweight stance.”
Yin has been working to improve listed companies and shareholder returns through “corporate value enhancement” programs, a Japanese-style initiative aimed at improving corporate governance and increasing investor participation.
The reforms were also introduced to counter the so-called “Korean discount,” in which Korean securities trade at lower valuations relative to regional peers due to investor concerns about issues such as corporate governance at large family-owned conglomerates.
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But Jayaraman said any new South Korean government would likely continue to push for these reforms and boost returns.
“We do feel encouraged that even the more left-leaning Democratic Party (opposition) appears to be supportive of South Korea’s value-enhancing plans, which should lead to market re-rating in the medium to long term,” he noted.
South Korea’s opposition leader said Yun’s martial law was an act of rebellion, but Yun denied that and accused political opponents of creating “false incitement” to overthrow him.
On December 4, Lee Jae-myung, leader of South Korea’s main opposition Democratic Party, members of Congress and the public held a rally at the National Assembly in Seoul, South Korea, condemning the South Korean president’s sudden declaration of martial law last night and demanding his resignation.
Kim Hongzhi | Reuters
After Yoon imposed martial law late on Dec. 3 (and later lifted it), South Korea’s Kospi stock index fell about 5.5% before recouping most of its losses.
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One of Causeway Capital Management’s largest active holdings is South Korean automaker Kia, which Jayaraman said is relatively insulated from domestic competition.
“Kia is more dependent on the United States for export markets and other parts of the West,” he said. “As an exporter, it faces greater risks in markets outside South Korea and will clearly be a beneficiary if we see continued weakness in the Korean won, particularly relative to its Japanese rivals.”
The South Korean won plummeted against the U.S. dollar after Yoon imposed martial law and is currently at its lowest level against the U.S. dollar in more than two years.
