Foreign IBs give Korean stocks overweight ratings

Major foreign investment banks have advised investors to purchase more South Korean stocks, citing the market’s upward potential down the road, a report showed Tuesday.

Six out of seven foreign IBs including Credit Suisse and Deutsche Bank have offered overweight ratings for South Korean shares, according to the report by the Korea Center for International Finance.

Credit Suisse predicted the benchmark KOSPI will likely trend upward, considering its current level has been undervalued about 16 percent. Deutsche Bank noted the KOSPI has recently traded 13.4 percent lower, forecasting it may rise as high as the 2,250 mark within the next year.

UBS projected the index will likely shoot up more than 10 percent by the end of this year, with its earnings-per-share growth estimate of 15 percent from 5 percent.

“Korean exports have seen less of a slowdown amid the global economic downturn, providing grounds for more stock purchases, ” said Kim Yun-sun, a KCIF researcher.

The IBs’ overweight ratings are based on their rosy outlook for South Korea’s corporate earnings.

Credit Suisse gave a brighter earnings picture for big South Korean firms in the medium term. Deutsche Bank advised increasing bets in automobiles, banks, insurance firms and ship builders.

JPMorgan and Morgan Stanley offered overweight recommendations for tech issues including Samsungx Electronics Co., and auto parts maker Hyundai Mobis.

In contrast, the IBs remained neutral on or proposed an exit from other Asian markets, with the Philippines, Thailand and Taiwan expected to suffer a worsening economy and downbeat corporate earnings.

Meanwhile, foreign investors unloaded a net US$832 million worth of local shares last month, following a net $872 million in Taiwan, the largest among the Asian markets. The combined amount of foreigners’ sell off, however, fell to a net $1.33 billion in May, down $8.42 billion from a month earlier. 

(Yonhap News)