Korean stock index has surged by 80% this year, but its valuation has hit a low; institutions say the storage sector still offers allocation value.

South Korea’s stock market has seen a round of explosive gains, but a strange situation has emerged: stock valuations have fallen to historical lows. The Korea Composite Stock Price Index has risen about 80% cumulatively this year, repeatedly setting record highs, but analysts are raising profit forecasts even faster. Profits at the two major memory-chip giants, Samsung Electronics and SK hynix, have surged sharply, causing the index’s forward price-to-earnings ratio to be only 6.4, even lower than levels during the 2008 global financial crisis. In recent trading, the market saw a major sell-off amid renewed doubts about the outlook for the artificial intelligence sector, further dragging valuations down. For investors, the question is whether such an unusually low price signals a good time to enter, or whether the market has already priced in expectations that the memory-chip boom cycle will ultimately end. Francis Tan, Chief Asia Strategist at Eastspring Investments in Singapore, said: “Whether it’s suitable to buy depends on an individual’s current portfolio allocation. If investors’ holdings of relevant assets are currently at a low proportion, this is a good time to position, bringing growth returns to the portfolio by tying it to the AI sector. Company earnings fundamentals are solid, and market expectations are that subsequent profits will remain strong.” (Sina Finance)
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