[Interview] Choi Sanghyun, Head of Bearing Asset Management: "Beware of Growth Stocks... Focus on Investment Cycles"

More Promising Stocks Benefit from Investment Cycle than Electric Vehicle and Metaverse Stocks
Focus on Companies with High Dividend Yields

[Asia Economy Reporter Minji Lee] "The era of giving excessive valuations to growth stocks is over. Selective approaches should be made focusing on companies that have entered the investment cycle among relatively overlooked stocks."

Choi Sang-hyun, Head of the Equity Division at Baring Asset Management, who recently spoke with Asia Economy, made this statement. As the timing of interest rate hikes approaches, he believes that the bubble of growth stocks, which had a steep upward curve during the COVID-19 pandemic, is inevitably the first to burst.

Recently, the global stock market has been linked to the Federal Reserve's (Fed) interest rate hike schedule. This is because the Fed has taken a stronger tightening policy than the market expected to curb inflation that has surpassed the patience level. Although the Federal Open Market Committee (FOMC) did not decide on a rate hike in January, Chairman Powell issued hawkish remarks, signaling a rate hike in March. Choi said, "The Fed's hawkish stance was already anticipated when the word 'transitory' was removed from inflation in November last year," adding, "The current adjustment is just a process of indices, which rose sharply at the end of the year despite Fed warnings, returning to their original positions, and it is risky to assume a crash will recur."

However, Choi advised caution regarding growth stocks. Stocks related to electric vehicles, the metaverse, and non-fungible tokens (NFTs), which led the global stock market last year, attracted competitive capital inflows due to high growth expectations.

Choi said, "It is time to increase interest in sectors that have become relatively cheap due to being defined as lacking growth and thus overlooked," adding, "Since stock market adjustments do not necessarily mean economic recession, it is appropriate this year to focus on sectors with investment momentum." Representative sectors are those expected to benefit from the process of correcting structural defects such as supply chain disruptions. Choi forecasted, "In the case of semiconductor companies, the investment cycle has already expanded, and stock prices have responded once," and "In the non-memory semiconductor sector, demand for electronic products has greatly increased, so there is room for the investment cycle to expand, and growth cycle benefits are expected."

Another way to find cheap stocks is to invest in companies with high dividend yields. If dividends are steadily increasing while dividend yields remain high, the stock price of that company can be considered cheap. Typically, dividend stocks attract attention before year-end dividends, and during times of high stock market volatility like now, they can serve as a safe haven. Choi advised, "Dividend yield is an intuitive criterion to judge whether a company's stock is cheap or expensive," and "The best way to increase returns is not to buy dividend stocks when it gets cold, but to buy them when they are cheap, like now."