By Lee Hyo-sik
Staff Reporter
The Seoul stock market is expected to maintain its momentum to reach a new historical high next year, with the local currency continuing to strengthen against the dollar, according to a New York-based Korea specialist Thursday.
In an interview with The Korea Times, Korea International Investment Fund manager Henry Seggerman said the benchmark KOSPI will continue its ascent toward 2,100 or higher by the end of next year.
He also said the Korean won will gain further ground against the greenback, projecting the won-dollar rate will hover around 1,000 and 1,100 won over the long term. But the strengthening of the won will have only a minor impact on the competitiveness of Samsung Electronics and other local exports, the manager said.
``I think it will be quite easy for the index to go up to 2,100 next year, given the easing of the global financial market turmoil and Korea's stronger-than-expected recovery. But the global stock market could undergo a correction within the next six months and could fall by as much as 20 percent. When it happens, Korea will not be immune to it,'' Seggerman said.
He then said many foreigners investing in Korean stocks have recently disposed of part of their holdings and raised cash reserves in anticipation of a market correction.
``I think the global financial crisis is not over yet,'' the manager said. ``In the U.S., some banks may collapse within the next six months. The problem has just been shifted to the U.S. government, or taxpayers, from troubled financial institutions that took the extreme level of leverage without proper risk management for greater profits. I think to fix this, the U.S. government has to print more money, which will push up prices of commodities and weaken the dollar.''
He said the world will not face hyperinflation as some economists have suggested, but will likely grapple with significantly high inflation rates in the foreseeable future.
Speaking about the active foreign buying of local stocks recently, Seggerman said that U.S. investors are not interested in buying U.S. stocks because of a slow economic rebound and weak dollar. ``The U.S. has shown a jobless recovery and investors there are extremely cautious about putting money into U.S. stocks. Alternatively, they are increasingly looking to overseas markets, including Korea, which are not heavily tied to the U.S. and Europe. Korea's recent entry into Financial Times Stock Exchange (FTSE)'s advanced market index and its strong corporate fundamentals have also boosted foreigners' appetite.''
The manager said he is optimistic about Korea's future, stressing Asia's fourth-largest economy has and will benefit from China's robust growth. ``The nation shifted its focus to China from the U.S. about 10 years ago, and five years ago, the world's fastest growing economy became its largest export destination. ASEAN and South America have also emerged as its major export markets. Korea should continue to diversify destinations for its products.''
Seggerman said it is important to expand the domestic market to mitigate external shocks to Korea. But considering its relatively small population and declining birthrates, it should continue to focus on exploring overseas markets for growth. ``I think Korea will grow by more than 5 percent next year, and from 2011 and beyond, it will manage to expand at 4-5 percent on a long-term basis.''
He then said he has met with executives at Doosan Heavy Industries, Hynix, LG Group, SK energy and other leading local firms to hear about their business plans and governance structure and other corporate issues.
``I am positive that these companies will continue to improve the corporate governance. I am asking all the companies we own if they are adopting environmentally-conscious policies. I am also asking if they are recruiting more women for senior management. I was pleased to note that on my first day here one company did mention to me a policy they initiated in 2008 to increase the percentage of women in management positions,'' the manager said.
When picking what stocks to buy, Seggerman said he looks at brokers' consensus and various financial indicators, including return on equity (ROE). ``We plan to slightly over-weigh utility, food and beverage, telecom and other defensive stocks here, while under-weighing banking, securities and insurance shares.''
His management company, International Investment Advisers, was the first American management company to receive the Investment Advisory License by Korea's Financial Supervisory Service, and currently holds a Discretionary Investment Management license for the management of Korean institutional assets.