NN Investment Partners optimistic about Korea's IT sector

Marco Willner, NN Investment Partners (NNIP) head of investment strategy, speaks in Amsterdam during an online press conference with the Korean media at the Federation of Korean Industries headquarters building in Seoul, Tuesday. Courtesy of NNIP

Dutch asset manager views BOK's rate hikes as part of global normalization

By Park Jae-hyuk

NN Investment Partners (NNIP) expressed an optimistic outlook for Korea's electronics consumer goods and software industries, regarding the IT sector as having long-term relevance which has also benefited from the ongoing supply chains issue and fiscal stimulus measures.

“These sectors will continue to be strong themes in the coming years,” Marco Willner, NNIP's head of investment strategy, said in Amsterdam during an online press conference with Korean media, Tuesday. “That should help the Korean equity index.”

The Netherlands-based asset management company, which is supposed to be acquired by Goldman Sachs during the first quarter of 2022, however, saw that Korea's other sectors are facing various problems, at least in the short run.

It expected market volatility to continue for a while, due to inflations, coronavirus pandemic and political uncertainties resulting from the forthcoming elections in many countries, including the U.S., France, Brazil and Korea.

“The headwinds for markets ― including continuing supply disruptions, a potential energy crisis ― are currently intensifying,” Willner said. “Our base case choppy waters scenario also anticipates a challenging environment for markets in 2022.”

His view was similar to those of other global investment banks, such as Morgan Stanley which lowered its KOSPI target to 3,000 last week with the belief that the lackluster equity market trends will continue until the first half of next year.

Willner said that even a 5 percent market correction will not surprise him, but in the longer term point of view, he remained optimistic about the global equity market.

He also mentioned policymakers scrambling to create a “strong state” through strategic spending, taxation levels and tackling inequality as another variable.

“The upside is that the global economy still has decent ground speed from this year and various strong state policies might add another impulse,” he said. “Investors might well find that 2022 turns out to be better than the current challenges seem to suggest.”

Regarding the Bank of Korea's key interest hike in August and the highly probable further rate hike later this week, he viewed these measures as part of global normalization in monetary policies, taken in response to the U.S. Federal Reserve's anticipated rate hike.

“The Fed's discussion has already affect central banks in Asian countries, including Korea,” he said.

Willner basically expected global policymakers to exit the come through the stimulus in an orderly and gradual fashion, but he did not rule out the risk scenario of either monetary or fiscal policy turning too hawkish too early.

“Central banks have so far acted responsibly and have reasons to believe that inflation might be transitory,” he said.

NNIP also advised investors to bet on alternative assets that are largely decoupled from traditional markets, saying that the spectrum spans different credit risks and durations ― from infrastructure or project finance, to commercial real estate or residential mortgages, to corporate loans or trade finance.

As an institution that has managed funds prioritizing sustainability over the past 20 years, the asset manager also said it sees increasing opportunities from investments considering the environmental, social and corporate governance standards.

The company claimed that increased regulations, such as the EU Sustainable Finance Disclosure Regulation, will bring more transparency and less green washing, stimulating the market.