Korea’s best performing investment management firm is forecasting steady annual growth of 7-8% for the country’s stock market, although it expects the economy to constrain market liquidity.
Park Kyung Min, the founder, president and CEO of Hangaram Investment Management, believes the baby-boomer generation will be reluctant to spend, noting that 85% of household income is tied up in the home – leaving little capital to be invested in the stock market.
However, Park also notes that Korea’s economy is better placed than many, given its close economic ties to the growth juggernaut that is China.
Korea has enjoyed a rapid economic recovery since the global financial crisis mainly due to its growth in exports, which has been driven by China’s domestic market boom and credit market expansion.
Korea is expected to record the fifth highest GDP growth this year among Group of 20 nations with projected expansion of 6.1%.
According to data released by the Korea International Trade Association, Korea will also go up one place this year to eighth in the global export rankings. Among the top 10 countries, only China and Korea are exporting more goods and services than before the crisis, the association finds.
Hangaram is the second largest firm in the industry after Cosmo Investment Management, and manages about $1.2 billion. It is notable for investing in small and mid-cap companies, which is unusual in a country where most asset managers prefer to invest in large-cap firms.
Park notes that there are about 1,800 companies across the Korea Composite Stock Price Index (Kospi) and Korean Securities Dealers Automated Quotations (Kosdaq), although he estimates that only 200 large-cap companies are covered by local brokerage firms.
As such, he says there is a lack of information on the remaining companies. Hangaram prides itself on the depth of its research covering about 400 mid- to small-cap firms, he adds.
Although Park notes that Korean mid- to small-cap stocks have not performed well – the Kospi mid-cap index has risen just 2.52% in the 12 months to September 14 – and expects this trend to continue, he says the firm’s Mid-to-Small Cap Fund has outperformed its benchmark index by over 331% since inception in November 2001.
Park also forecasts that the Kospi will hover around 1,800 points this year. The Kospi closed at 1,815.25 on September 14.
Hangaram is one of 120 Korean investment management firms with discretionary investment mandates. It manages institutional investors’ money only.
Park started his career with Nomura Securities in 1985 and previously worked at Daewoo Securities and SEI Asset Korea before co-founding Hangaram in 2001.