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| Citigroup Center in New York / AP-Yonhap |
By Park Jae-hyuk
Citigroup has issued a skeptical outlook for the Seoul bourse, taking the opposite stance to Goldman Sachs, Morgan Stanley and JPMorgan Chase, which recommended global investors to bet on Korea in the forthcoming year.
According to Bloomberg, Tuesday, Citi's global strategy team led by Robert Buckland rated Korea "underweight," contrary to Goldman Sachs and Morgan Stanley, both of which were bullish on the country on expectations of a cyclical recovery.
The report stated that Citi expects a trade slowdown to damage Korea's earnings momentum
Despite hopes that Korean companies are becoming more shareholder-friendly, their dividend payouts remain "lackluster," the Citi strategists were quoted as saying by Bloomberg, adding that high capital expenditure will continue to be a drag on free cash flow.
The U.S. investment bank's forecast is in stark contrast to other multinational banking concerns.
On Nov. 24, Morgan Stanley's analysts including Seok Joon upgraded the Korean stock market to "overweight" from "equal-weight," raising its KOSPI target to 2,350 and rating the Seoul bourse as the second-most attractive among emerging markets.
Goldman Sachs' researchers including Timothy Moe also raised their valuation for the Korean market to "overweight" from "market weight" amid expectations for a recovery in the nation's large-cap tech industry.
"We expect the tech hardware sector to lead earnings recovery in Korea on stabilizing memory pricing, normalizing DRAM and NAND (flash memory) inventories and better demand and supply dynamics," the bank said.
JPMorgan also has an optimistic outlook on Korean stocks, saying they will "surprise" investors in 2020.
"It's one of the markets that we have a key overweight going into year-end as well as early next year," JPMorgan's head of Asia ex-Japan equity research James Sullivan was quoted as saying by CNBC. "Names like Samsung that we've seen a strong performance (from) are on our top picks list, as we go through the first half of next year."
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