Hantoo Asset Management "Korean Stock Market Cycle Near Bottom"‥ 'Power of Korean Investment' Investment Seminar Held

On the morning of the 19th, Korea Investment Management held the 'Power of Korea Investment Seminar' at the Four Seasons Hotel in Gwanghwamun, discussing recent issues surrounding the domestic stock market, such as shareholder activism and the rise of technology stocks.

Jung Sang-jin, Head of Equity Management at Korea Investment Management, who hosted the seminar, stated, “The Korean stock market is currently positioned near the bottom in the long-term cycle,” and added, “This seminar was organized based on the judgment that it is time to examine the issues facing the market and seek investment opportunities.”

The speakers included Lee Chang-hwan, CEO of Align Partners Asset Management, and Lee Hyung-soo, CEO of HSL Partners. Lee Chang-hwan is recognized as an expert in the field of shareholder activism investment, while Lee Hyung-soo is known for his expertise in information technology (IT) and semiconductor investment.

Lee Chang-hwan, the first presenter, began by saying, “The undervaluation of the Korean stock market stems from weak corporate governance.” He continued, “In addition to the world’s highest inheritance tax rates and high dividend income tax rates, unlike the U.S. and other countries, Korea’s Commercial Act and precedents regulate directors’ fiduciary duties only to the ‘company’ rather than to the ‘shareholders,’ causing directors to work solely for the interests of major shareholders.”

However, he noted, “Recently, with the increase in individual investors and amendments to the Commercial Act and Capital Markets Act, interest in shareholder value has been rising,” and added, “The number of shareholder proposals, which was only 124 in 2015, increased to 315 in 2021, supported by the growth in individual investors.”

The second presenter, Lee Hyung-soo, said, “In the first half of this year, semiconductor stocks surged as the bottom of the artificial intelligence (AI) and memory cycles overlapped, but the atmosphere may change in the second half,” and explained, “As demand for smartphones, PCs, and general servers recovers, there may be a realignment of shares related to front-end processes.”

Investment strategies suited to the changing domestic stock market were also presented. The investment strategy presentations were given by Kim Ki-baek, Head of Equity Management Division 3 at Korea Investment Management, and Kwak Chan, Senior Researcher of the Equity Research Department. Kim Ki-baek manages value stock funds such as the ACE Shareholder Return Value Active ETF, while Kwak Chan manages technology stock funds such as the Korea Investment Tech Fund.

Kim Ki-baek said, “In the U.S., shareholder activism funds and general shareholders’ proposals began in the 1980s, and shareholder returns became full-fledged in the 1990s. To this day, shareholder returns remain a core factor in corporate stock prices,” and predicted, “Considering the government’s financial market modernization policies and the timing of corporate generational changes, such changes are expected to appear in the domestic stock market in the future.”

Kim particularly mentioned, “Changes in corporate governance and shareholder return policies will lead to increased corporate value,” and added, “The ACE Shareholder Return Value Active ETF is the only active ETF in Korea that can benefit from shareholder return changes from mid-sized to small companies. It is suitable for those seeking stable mid- to long-term returns and who are interested in corporate shareholder return and governance changes.”

Senior Researcher Kwak Chan analyzed, “Due to subsidy reductions and charging infrastructure issues, electric vehicle demand has shown short-term contraction, leading to downward revisions of short-term targets for related domestic companies. Meanwhile, the operating rates of domestic semiconductor supply chain management (SCM) companies are expected to rise,” explaining, “This is because purchases of parts to meet the second half’s DDR5 production bit growth (B/G, the semiconductor production growth rate converted to bit units) are expected to continue.”

He added, “The Korea Investment Tech Fund has reduced its proportion of secondary batteries since the end of the second quarter, while proactively expanding its share of domestic semiconductor SCM companies.”