'Stock trading a game of psychology,' says SPARX manager

SPARX Asset Management Korea Executive Managing Director Bae Jung-hyun speaks during an interview with The Korea Times. / Courtesy of KeyWest Partners

By Nam Hyun-woo

Amid growing interest about the use of artificial intelligence (AI) in the financial sector, SPARX Asset Management Korea Executive Managing Director Bae Jung-hyun believes that stock trading is a game of “psychology,” something that an automated investment tool is not equipped to engage in.

The Japan-based asset management company won an award from the Financial Supervisory Service earlier this year with its SPARX Bon-Japan Fund, designed to achieve capital gains through investment in equities in Japan. The small and mid cap fund, launched in April last year, notched up a 9.33 percent return rate (class F) which is the highest among similar funds investing in Japanese equities during the past year.

“SPARX’s investment philosophy of ‘macro is the aggregation of micros,” said Bae during a recent interview with The Korea Times. “Based on such a philosophy, we approach and meet executives and CEOs of each investable company (bottom-up) to evaluate whether their business vision is solid.”

This strategy, seemingly not matching up with the current digitalized and rapid investment trends, allows SPARX to directly learn the “non-quantitative things” about a company, such as how talented or competent its leader is or what kind of strategy it has in order to make its business prosper -- aspects that are seldom mentioned in financial statements.

“Excessive earnings from asset management without a style often end ups being random,” said Bae. “And inconsistent gains may end up becoming losses in the end. Thus, you have to look for an asset management company which is consistent in gaining results. It can be seen at a company’s investment policy and its previous record,” he said.

According to Bae, SPARX Bon-Japan fund could be successful after an understanding of the fact that the economy has been and will be growing slowly as society ages.

“Small and mid cap stocks are strong in the Japanese market,” said Bae. He said stock markets in other countries, including Korea and some European countries, are led by large companies, but that is not the case for Japan, because small and medium-size enterprises in Japan have long been striving for survival through restructuring or cost reduction amid the country’s long-term recession.

“About one third of Small and medium-sized companies in Korea sees black numbers, which is not so good for investors to invest to them. On the other hand, about 90 percent of small and mid cap stocks in the Japanese market record surpluses. So this is the reason why I recommend Japan for investors who want to invest in overseas companies,” Bae said.

The veteran investor recommended businesses which continue to make profit a low growth trend, such as Muji, a Japanese household and consumer goods retailer.

Another emerging SPARX’s fund is SPARX Value Power Fund. The fund, which invests in value stocks that tend to be traded at lower prices relative to their fundamentals, notched up a 12.25 percent earnings rate since it was launched in January last year, the highest among stock fund products launched in Korea last year.