Emerging Trends: Stocks, Sectors & Styles

October 6, 2024

KEY THEME: Buy S.Korea - cheap and good...

A. S.KOREAN MACRO IS, ACTUALLY, NOT BAD

Bad news first:

1. S.Korea has the worst demographic profile

2. Some cyclical ups and downs – PMIs and auto production have dropped

That's where the bad news ends...

The rest of the macro looks pretty good:

1. S.Korea has low Debt/GDP (unlike Japan) - despite the horrible demographics

2. S.Korea has low Government Deficit - despite the horrible demographics

3. South Korea is one of the top global spenders on Research & Development

4. Exports increased - particularly in the IT sector and semiconductors

5. The unemployment rate hit a record low of 2.4%

6. Stable inflation - South Korea's CPI rose by 1.6% - the lowest in over three years

7. Consumer is deleveraging (paid back) its debt accumulated around Covid

8. And, housing prices are bottoming out

B. BUYS ON KOREAN CURRENCY, EQUITIES, AND BONDS

1. Buys on KOSPI and S.Korea ETF - inflows from major economies (US, Japan, Europe)

2. Potential upside for the Korean Won - 3% in 15 weeks

3. Fresh short-term Buys on 10Y and 20Y bonds

C. WELL-RUN TECHNOLOGY, HEALTHCARE, AND ENGINEERING COMPANIES ARE LEADING THE CHARGE

1. S.Korea is nation of extraordinary talented engineers

In Aug 2023, South Korea's New Growth Strategy 4.0 outlined key goals, including:

1. Boosting AI semiconductor industries

2. Leading the global Urban Air Mobility market.

3. Securing clean hydrogen production.

4. Advancing autonomous driving technologies.

5. Promoting battery remanufacturing.

6. Expanding private-sector-led My Data services.

2. S.Korea is among the cheapest markets globally trading at 8.5 P/E and 0.8 Book value ... Nuts!

D. WHAT CAN CATALYZE UNLOCKING THE VALUE OF S.KOREAN EQUITIES

1. S.Korea might introduce a new tax reform, which may complement the ongoing 'Corporate Value-Up Program'

2. Waves of shareholder activism from the neighboring Japan might instigate Koreans to pursue the same

3. If you missed buying China last week, S.Korea is objectively more capitalistic and, definitely, more pro-Western

4. If you missed buying Nvidia - here is your chance to buy the best and the cheapest semiconductor companies in the world

5. If the world would pursue the rearmament, S. Korean defense industry (very innovative) would also benefit

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