"Markets Expected to Outperform the US in the Second Half... Focus on Europe, Korea, and China"

Interview with Kim Myungjun, Head of Global Index Management at Mirae Asset Global Investments
"It's Time to Pay Attention to ETFs for Global Diversification"

Recently, stock market experts have been emphasizing the importance of diversification. There are growing arguments that, even if the US stock market continues its streak of all-time highs, it is time to lower expectations in terms of returns.

Kim Myungjun, Head of Global Index Management at Mirae Asset Global Investments, recently told Asia Economy, "When the concentration in the US market is at a historically high level, there is a burden of having to significantly lower expected returns when making new purchases." He added, "Investing in global markets, including the US, is a way to reduce volatility and enhance performance."

He further stated, "According to economic growth forecasts and long-term capital market assumption reports from global financial institutions, the expected return on investment in emerging markets is relatively higher than that of US stocks."

The US stock market has maintained relatively high growth rates in recent years, driven by profit increases from big tech companies, including the 'Magnificent 7 (M7),' and the growth momentum of artificial intelligence (AI). The Nasdaq Composite Index, which includes stocks like Tesla and Nvidia?popular among Korean retail investors?recorded a nearly 100% increase over two and a half years from 2023.

Kim said, "It seems likely that the US stock market will continue its gradual upward trend in the second half of this year." However, he also explained, "It is time to consider whether the US will continue to deliver the best performance among global stock markets."

He noted, "In the first half of this year, Chinese AI models such as DeepSeek and Qwen began to emerge in earnest," and predicted, "It is highly likely that the monopoly of US big tech companies will not continue." He added, "Big tech companies have enjoyed a valuation premium by recording a significantly higher rate of profit growth compared to other companies. However, from the second half of this year through next year, the profit growth rate is expected to slow, making a partial reduction in the valuation premium inevitable."

While the US stock market takes a breather after its rapid ascent, Kim pointed to Europe and emerging markets as favorable places to achieve excess returns. He said, "Among developed markets, I am paying close attention to Europe, where there is ample fiscal and monetary policy capacity and the economic growth outlook is expected to rebound." Additionally, he said, "Among emerging markets, I am positive on Korea, China, and India. Korea, in particular, was significantly undervalued relative to its fair value due to increased political uncertainty at the end of last year."

For individual investors, whose investment capital is relatively small and who may have limited access to information, there are inevitably various constraints on diversifying globally. Kim said, "The easiest way to diversify is to invest in ETFs like the 'TIGER Total World Stock Active ETF.' I judged it suitable for long-term investment and included it in my children's accounts."

The TIGER Total World Stock Active ETF, which diversifies investment between US and non-US markets at a 60:40 ratio, uses the 'FTSE Global All Cap Index' as its benchmark. The FTSE Global All Cap Index includes more than 10,000 stocks from 48 countries, including the US, India, Brazil, and the Czech Republic.

He emphasized, "Mirae Asset Global Investments has been managing overseas index products since 2006," and added, "Since 2015, we have accumulated expertise by managing various products tracking the MSCI index, which includes a very large number of stocks, for over 10 years." He further noted, "Among domestic asset management companies, we have the most extensive experience in managing overseas index products."

Kim also recommended commodities such as gold and copper, which are classified as both raw materials and alternative investments, as promising wealth management tools outside of stocks. He introduced the idea that including even a small portion of commodities with low correlation to traditional assets in the overall portfolio is a way to maximize the benefits of diversification.