Korea is presenting an ‘unusual’ and attractive opportunity for investors, according to JPM’s emerging markets head Richard Titherington.
Titherington, who runs the US$2.5 billion JPM Emerging Markets Opportunities fund, said there are a confluence of factors drawing him towards Korea.
‘I think there’s an unusual opportunity here,’ he said. ‘I think Korea is a cheap market.’
He acknowledged two headwinds facing Korea in the form of a weakening yen against the won and slowing smart phone sales, but Titherington dismissed these concerns.
He said: ‘I think both those issues are cyclical rather than structural, so that presents a medium-term buying opportunity.’
Titherington has reflected this bullish stance on Korea with a large position in Samsung Electronics, which makes up 6.3% of the fund.
Mindful of the impact of tapering and a strong US dollar on the emerging markets, Titherington said currency risk remains a major concern for developing world investors.
‘Your biggest risk in investing in EM is currency risk, so for a stable and rising dividend stream over time, you want to be diversified by country, industry and currency.’
In Titherington’s income-focused strategy, the JPM Emerging Markets Dividend fund, he is more bullish on telecoms, which he views as potentially providing strong returns in the coming year.
‘From a sector standpoint, we’re pretty excited about telecoms. We think telecom providers are going to benefit from increasing data usage across a broad range of emerging markets.’
‘You see it in markets across Southeast Asia, Korea, Russia and Brazil. It’s a pretty broad phenomena,’ noted Titherington.
The JPM Emerging Markets Opportunities A Acc USD fund returned 7.1% over the three years to the end of November 2013. This compares to a rise of 3.13% by its Citywire benchmark, the MSCI EM (Emerging Markets) TR USD, over the same period.
Meanwhile, the JPM Emerging Markets Dividend has returned 7.9% over the three months to the end of November 2013. This compares to a rise of 10.1% by its Citywire benchmark, the MSCI EM (Emerging Markets) TR USD.