"March Inflation Reduction Act Details... Focus on Secondary Battery Stocks"

Choi Se-jin, Head of Global Equity Division at Hanwha Asset Management
Market Expected to Be Led by Institutions and Foreign Investors... Activist Funds Also in Focus

[Asia Economy Reporter Park So-yeon] "Refocus on secondary battery-related stocks."

Choi Se-jin, head of the Global Equity Division at Hanwha Asset Management, recently said this in an interview with Asia Economy. Choi explained, "Once the detailed provisions of the U.S. Inflation Reduction Act (IRA) are finalized in March, the tax credits for secondary battery-related companies operating in the U.S. will be confirmed in numbers." This is why Choi believes the secondary battery sector will attract attention once again this year. He assessed, "In the current period of structural changes such as deglobalization and economic bloc formation, this sector can relatively benefit reflexively."

Choi is also closely examining industries that experienced significant declines last year. He said, "From the perspective of foreign and institutional investors, industries with excessive price drops may have price appeal," and predicted, "The market could respond even to small fundamental improvements."

He noted that last year was a period when prices of all assets including stocks, bonds, and real estate sharply declined, but the market sentiment has completely changed this year. Choi explained, "Bond yields are rapidly falling and the stock market is strongly rebounding," adding, "Especially with foreign buying coming in and rapid rises centered on large-cap and growth stocks, it is showing patterns similar to those seen at the beginning of a bull market."

However, he said, "The problem is the speed." He mentioned, "Although I see a high possibility of monetary tightening easing, I believe this expectation has already been largely priced into asset prices in the short term." He also analyzed, "Recent domestic corporate earnings have been disappointing compared to stock prices," and added, "Although stock prices lead the economy, it is still too early to talk about an economic rebound." His outlook is that even if the interest rate hike cycle ends, a tightening environment will persist for a considerable period.

Recently, the area Choi is most focused on is the extent of the economic recession. He predicted, "Unless the risk spreads to a systemic level, there is a likelihood that expectations for economic recovery, such as a rebound in Korea's export growth rate, will be reflected in the first half of this year."

He forecasted that the market, which was dominated mainly by individual investors during the COVID-19 pandemic, will shift back to being led by institutions and foreigners starting this year. He expressed hope that in a market led by institutions and foreigners investing based on fundamental indicators, more predictable investments will be possible. He projected, "The market will return to one where price predictions based on fundamental indicators are possible."

Meanwhile, he advised paying attention to the movements of activist funds. Choi said, "Recently, independent asset management firms have been actively engaging in shareholder activism," and advised, "We need to closely observe how companies respond to their voices."