by Sangmi Cha
South Korea’s equity benchmark may rise more than 50% from its current level over a two-year period should corporate governance reforms gain momentum, according to JPMorgan Chase & Co.
Korea remains a key overweight market in Asia and among emerging markets, strategists led by Mixo Das wrote in a note on Friday. The Kospi Index, which has gained 32% so far this year to near a record high, could reach around 5,000, they said. That compares with Friday’s close of around 3,176.
“We continue to recommend adding on any volatility as long as the reform process remains on track,” the JPMorgan strategists said. “Any volatility in global/regional equities over the summer — on tariff concerns, growth slowdown, bond market volatility — could thus quickly invite buying.”
The bullish outlook comes after JPMorgan raised Korean stocks to overweight from neutral last month, based on ongoing governance reform.
President Lee Jae Myung has pledged lift the Kospi to 5,000 during his five-year term, with a “next phase of governance reforms”. He also wants to tackle the so-called Korea discount, a long-standing grievance among global investors on a valuation gap compared to regional peers such as Japan and Taiwan.
Recent reforms, including the passage of the commercial code revision, have been supercharging the nation’s $2.1 trillion stock market. The Kospi is one of the best-performing gauges in the world this year.
The Kospi could end up trading between 3,200 and 3,500 over the rest of the year, the JPMorgan strategists wrote, pointing to PharmaResearch Co.’s spin-off plan cancelation this week as a positive sign that demonstrates “apparent bipartisan support” for further reforms.
“Ironically, foreign buying in the market this time around is far more muted, than in early 2024,” according to the strategists. “But given the interest we receive from global investors, we believe this is more a case of investors looking for better entry points.”
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