Korea’s Kospi Smashes Three-Year Ceiling as Foreigners Pile In

After three years of failed attempts, South Korea’s Kospi index has finally broken through the 2,100 level as foreign investors bet the nation’s shares will catch up with global peers.

The benchmark equity gauge for Asia’s fourth-biggest economy surpassed 2,100 for the first time since August 2011 on Tuesday and extended its gain on Wednesday. The measure has approached 2,100 at least six other times since April 2012, only to fall back as its 3 percent gain over the period trailed the MSCI All-Country World Index by 27 percentage points.

Shinhan BNP Paribas Asset Management Co. and Midas International Asset Management Ltd., which oversee a combined $48 billion, say the Kospi’s milestone will herald further gains after foreign investors bought a net $4.3 billion of Korean shares this year. Even after its rally, the gauge is valued at a 32 percent discount versus MSCI’s global index.

“Foreigners seem to be attracted by cheap valuations in Korea and improving corporate earnings,” said Heo Pil Seok, the chief executive officer at Midas International Asset Management in Seoul.

The Kospi will probably climb to 2,200 in the “short term,” according to Sung Chang Hoon, the head of equities at Shinhan BNP Paribas Asset Management Co. in Seoul. The Kospi trades at 11.1 times projected earnings for the next 12 months, versus 16.4 for the MSCI global index, according to data compiled by Bloomberg.

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