South Korean companies that sell cosmetics, food containers and vehicles in China will outperform the benchmark index as their sales are sheltered from a global economic slowdown, the smaller nation’s second-best performing fund manager said.
The companies are either selling necessities or increasing market share in the world’s second-largest economy, making them less susceptible to inflation, said Kim Jae Dong, the Seoul-based head of equity at SEI Asset Korea Co., which manages about $5.2 billion in assets.
“Bets on a structural growth of Chinese consumer demand won’t disappoint even as heightened uncertainties over the global economy and financial system are sparking overall risk aversion,” Kim said in an interview today. “Their outperformance to the benchmark index is likely to continue for a while.”
China, the biggest contributor to world growth last year according to the International Monetary Fund, may expand more than five times faster than the U.S. and euro area this year, according to forecasts from Citigroup Inc. and HSBC Holdings Plc. China’s consumer-price gains eased to 6.2 percent in August from a three-year high in July.
Kim’s SEI Nurture Regular Savings Plan Equity Fund gained 10 percent in the past one year, the second highest among 107 equity funds focusing on South Korean stocks, according to data compiled by Bloomberg. The fund has “overweight” holdings on Kia Motors Corp., an affiliate of Hyundai Motor Co., Orion Corp., a snacks maker, and Amorepacific Corp., a cosmetics manufacturer, said Kim.
Plastic Containers, Cars
South Korea’s Lock & Lock Co., which makes plastic food containers, plans to increase the number of its stores in China ten-fold to 1,000 in three years, the Korea Economic Daily reported on Sept. 18. Kia, South Korea’s second-largest automaker, said it sold 190,000 vehicles in China in the first six months, an increase of 18 percent from a year earlier.
“South Korean auto names are boosting their brand recognition in China, where the bulk of global demand growth will come from going forward,” SEI Asset’s Kim said.
Kia and Orion, both based in Seoul, climbed 32 percent and 37 percent this year through yesterday, respectively, while the benchmark Kospi Index fell 19 percent. Seoul-based Amorepacific gained 5.4 percent for the same period, while Asan-based Lock & Lock rose 1.1 percent. Kim is also “overweight” on Lock & Lock.
Among other South Korean equities, Kim said he favors mobile contents providers such as game makers as growing use of smartphones and other mobile devices will increase their earnings.