BlackRock Buys Korea Stocks as Valuations Lure Foreigners – Bloomberg 09-26-14

Salient to Investors:

Andrew Swan at BlackRock said:

  • Blackrock has an overweight position in Korea stocks as a lot of negativity is already priced in and the market is so cheap.
  • The South Korean equity market could be in the early stages of bottoming.
  • A recovery in domestic demand may help shrink Korea’s current-account surplus and curb the currency’s appreciation.

Oh Sung Sik at Franklin Templeton Investments said some active funds have upgraded the Korean equity market from underweight.

Daphne Roth at ABN Amro Private Banking said the won’s strength versus the yen poses a risk to Korean exporters, which have Japanese rivals, and sees few catalysts.

MSCI Korea index companies are valued about the same as their net assets, a 36 percent discount versus the regional index, and at the steepest discount versus the MSCI Asia ex-Japan Index since 2007.

Foreign investors purchased a net $4.95 billion of Korean shares this quarter, the most among 8 Asian markets and more than 3 times as big as went into Taiwan, and versus $4 billion into India and $1.6 billion into Thailand.

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HSBC Sage Flags Emerging-Market Pullback on Dollar – Bloomberg 08-07-14

Salient to Investors:

  • David Bloom at HSBC said to sell emerging market currencies, including the Rand, Ruble and Mexican and Colombian Peso, on increasing signs of US growth supporting the US dollar .  Bloom said a mass investor exodus depends on what happens to volatility on long-term US rates moving up – if long rates rise then the resulting full-blown dollar rally will hit emerging markets hard.
  • Phoenix Kalen at Societe Generale expects the rand to weaken and become more volatile over the next 3 months.
  • Koon Chow at Barclays said volatility remains near record lows as investors seek higher yields with US rates in their record-low zero to 0.25 percent range.  Chow said low global market volatility and low yields in many developed fixed-income markets will continue to push capital to emerging markets, while gains in the dollar will help differentiate currencies.
  • Futures indicate the Fed won’t raise its benchmark rate until at least mid-2015.
  • Citigroup downgraded its view on developing currencies.
  • Roland Gabert at DWS Investment  dislikes the rand, Brazilian real, South Korean won and zloty and said discussion of a rate hike in the US is negative for emerging-market currencies.


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