More investors to bet on risky assets in 2020

Prices of copper, chip stocks to rise amid rosy global trade outlook

By Lee Min-hyung

Investors will turn their eyes to risky assets, such as copper and some cyclical stocks in 2020, as the recent ceasefire in the trade war between the United States and China is expected to drive down their preference for resources perceived as stable and less volatile, analysts said.

During times of uncertainty, investors prefer assets deemed stable, including real estates, gold and the U.S. dollar. Gold prices have particularly soared in 2019 in line with heightened trade uncertainties in the face of the Washington-Beijing dispute and Tokyo's export restrictions against Seoul.

Gold was traded at 45,892 won ($39.55) per gram on the local gold exchange as of the end of 2018. But the price has posted a steep rise this year. The gold price has not fallen below 55,000 won this month, up 20 percent from a year ago.

The preference for items that offer stable returns has been the talk of the investment town here in 2019 when the real estate investment trusts (REITs) gained explosive popularity among investors, as the real estate indirect investment market was considered attractive amid global trade uncertainty and weak economic growth here and abroad.

But with the world's two largest economies showing rare signs of de-escalating their feud, investors are expected to pay more attention to the aforementioned volatile assets, economists based in Seoul said.

“A preference for risky assets will continue to strengthen in line with the weakening dollar after the U.S. and China have alleviated their trade tension,” Park Sang-hyun, an economist at HI Investment & Securities, said.

Against this backdrop, the copper price has risen sharply in recent weeks. The copper price jumped to $6,211 per ton as of Dec. 27, up 6.8 percent from $5,812 on Dec. 3.

Also of note is the recent rise of semiconductor stock prices. The analyst expected more foreign capital inflow in 2020 when the market conditions for the chip industry will bounce back.

“After the first-phase trade deal between the U.S. and China, the local export started showing signs of rebound on rising semiconductor prices,” he said.

The prolonged trade dispute has been one big risk factor that blocked chip stocks, such as Samsung Electronics and SK hynix, from enhancing their valuation in 2019, but things will take a turn for the better in 2020, according to the analyst.

“The influx of foreign capital into the local stock market will expand, as risk factors surrounding the external political uncertainty are being cleared away,” he said.

Hyundai Motor Securities analyst Kim Joong-won said investors would persist their preference for risky assets at least until the first half of this year.

“Starting this December, stock markets from emerging countries in South America and Asia have reported more bullish runs than those from developed countries, such as the U.S. and Japan,” he said.

This is a clear indication that the global financial market prefers assets deemed less stable, according to the expert.

“The trend will continue until the first half of 2020, and Korea's main bourse is also expected to benefit from this and touch the 2,250-mark sometime next year,” he said. The benchmark KOSPI closed at 2,204 on Friday.