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Investing.com-- Bernstein analysts recommended investors increase exposure to South Korean equities, citing cheap valuations, an emerging earnings upgrade cycle, and renewed foreign interest.
In a research note, Bernstein analysts highlighted Korea as Asia’s top-performing market this year, with a 25% gain in USD terms, driven by broad-based earnings recovery across sectors excluding financials and energy.
Korea is heading towards an earnings upgrade cycle, and global investor interest is expected to rise, said Bernstein.
Analysts pointed to attractive valuations, with MSCI Korea trading at 0.93x price-to-book and 8.5x forward P/E, near decade lows. Shareholder returns are improving, with ROE rising to 9% from 6% last year and dividend payouts climbing to 21%, though both metrics remain below global peers, they added.
Foreign investors have returned after nine months of outflows, injecting $2.7 billion since May. Bernstein also expects domestic investors to repatriate funds from U.S. markets, providing further support.
President Lee Jae-myung’s proposed reforms, including governance changes and efforts to lift Korea’s MSCI developed market status, could accelerate the "value-up" program, Bernstein said.
Bernstein favors value stocks, with top picks including Hyundai (OTC:HYMTF) Motor (KS:005380), Kia Corp (KS:000270), and Samsung Electronics Co Ltd (KS:005930).