The chairman of AssetPlus Investment Management in Seoul, Kang Bang Chun, has added his voice to domestic optimism about the outlook for South Korea’s equity market for the next year.
The Korea Composite Stock Price Index (Kospi) has risen 13.2% so far in 2010 to close at 1,903.95 points on October 6. It follows a rally of almost 50% in the index last year.
Kang says he expects the Kospi to continue trending upwards for the next year, noting in particular China’s strong and sustainable economic growth.
Korea has enjoyed a rapid economic recovery since the global financial crisis because of its growth in exports, largely driven by China’s domestic market boom and credit market expansion.
Kang also predicts that global investment capital will continue to flow into Asian stock markets generally, including Korea’s, amid expectations of continuing weakness in the US dollar, combined with the likelihood that Korean institutional investors will reallocate capital into the domestic equity market given the low interest-rate environment.
By way of incentive, he notes that the average price-earnings (P/E) ratio of Korean stocks is around 10.3, comfortably below their historic average for the past five years of 11.67. By comparison, stocks on the Dow Jones have a P/E ratio of 13.03 and a five-year average of 14.98; the MSCI Global figure stands at 13.45 and 14.47; the Hong Kong stock exchange records 12.70 and 14.52; and the China A-share market boasts 14.75 and 20.54.
Kang’s views add to growing optimism among fund managers on the prospects for Korea’s equity market. Kim Young-il, chief investment officer of domestic equities at Korea Investment Management, recently predicted that the Kospi would hit 2,000 points by the end of 2010.
Kang founded AssetPlus Investment Management in 1999 as an investment advisory firm. It was subsequently converted into an asset management company in mid-2008.
AssetPlus has total assets under management of about $600 million and boasts just three funds: a Korean equity fund, a global equity fund and a China equity fund. Its flagship Korea fund, called KoreaRichTogether, has returned 71.42% from mid-2008 until the end of the third quarter (against 19.1% for the Kospi).
Interestingly, AssetPlus is the only asset management firm in the country to use its own direct distribution. It has several thousand retail accounts and boasts mandates from several notable institutional investors, all courtesy of its own internal marketing structure.
The remaining 70-plus Korean asset managers use indirect channels such as brokerage firms, commercial banks and even insurance companies.
Kang notes that the industry at large, including rival firms, distributors and even regulators, have all studied his company’s model to determine how it functions without distributors’ help.
He says he introduced this policy when establishing asset management status in mid-2008 out of a desire for independence and to steer clear of a distribution-influenced management mindset, since he views this as the best way to create products and protect clients.
“I am very proud of our direct experimental distribution network system,” he says, although he adds: “It may take a while until we finally settle down and enjoy this new structure.”
Regarding future cooperation or partnership arrangements with global investors, Kang says he is open to the idea provided that they accept AssetPlus’s investment philosophy and style of distribution at the outset.