Mok Dae-gyun, Chief Investment Officer (CIO) of KCGI Asset Management. / Byun Seong-hyeon, Hankyung.com reporter byun84@hankyung.com
“September is traditionally a volatile period as we head into the end of the year. I would minimize portfolio swings.”
Mok Dae-gyun, Chief Investment Officer (CIO) of KCGI Asset Management, who is considered the first generation of overseas fund managers in Korea, gave this advice on short-term stock market response strategies on the 9th, ahead of the Chuseok holiday. Hankyung.com asked him about stock market trends until the end of the year ahead of the Chuseok holiday, as well as stock market issues such as the government’s ‘Value Up Program’ (increasing corporate value) and the implementation of the Financial Investment Income Tax (FIAT).
Mr. Mok entered the investment industry as an analyst at Daewoo Securities and then managed flagship funds as a star fund manager at the Global Management Headquarters of Mirae Asset Global Investments. KCGI Asset Management, where he was CIO, changed its name after acquiring Meritz Asset Management last year and saw its net assets of public offering funds increase by 22% in the past year.
Stock market volatility is expected to be high in September.
▶The stock market has always been bad since September 2021. It has been volatile. High volatility means that there is a high possibility of mistakes in trading. It is especially worrisome because the US, China, and manufacturing indicators are falling. There is even talk of an ‘AI bubble’ in the stock market. In addition, the US presidential election is also a factor that increases volatility. When moving trading positions, you should reduce the size and respond more cautiously than usual.
The Federal Open Market Committee (FOMC) is scheduled to meet this week.
▶I worked as a fund manager at an asset management company for about 10 years, and I think I spent more than 9 Chuseok holidays during that time. Whenever I moved my portfolio right before the holiday, the performance was always bad afterwards. That’s why I usually don’t move. This FOMC is also scheduled right after the Chuseok holiday, so it’s not easy to respond.
Foreign investors also turned net sellers for the first time in 10 months.
▶Most net selling came from the IT and electrical and electronics sectors. If you have a negative view of the market as a whole, you should sell widely, but since IT is the main focus, it is concentrated in IT. It seems that the expectations for Samsung Electronics and SK Hynix’s second-half performance have been lowered. So, when looking at the direction, it seems right to be a little more conservative than before or to lower your expectations.
This year, the KOSPI index’s performance has been as low as that of China and Russia.
▶When looking at the domestic stock market’s price-to-book ratio (PBR) this year, it is rounded up to 1 times. To be exact, it is around 0.9 times, which is at a level where it is almost at the ‘bottom’ with China in the global stock market. China still has a higher return on equity (ROE) than us. (In the domestic stock market) As foreigners started to leave, a supply and demand gap was created. When foreigners were about to invest in KOSPI, the manufacturing purchasing managers’ index (PMI) in the US and China suddenly started to fall, and semiconductor DRAM prices also slowed down, so they seem to have changed their minds.
Recently, semiconductors and biotech stocks have been sluggish, and leading stocks are not visible.
▶Ultimately, the domestic stock market is based on exports as a momentum (upward driving force). The AI industry is expected to continue to grow in size. In relation to this, it is true that companies related to power facilities also look promising. Even if there is talk of a ‘bubble’, it is true that their size is growing. The reason why stock prices are currently stagnant is because competition is intensifying and profitability seems to be decreasing. Just as Levi’s, a jeans company, eventually survived (despite fierce competition), I think power facility-related stocks will do well in the future. In addition, defense and shipbuilding stocks linked to the advanced country cycle also look good.
The Korea Value Up Index will be released soon.
▶ In the long term, value-up is the direction the domestic stock market should go. Since there is a policy drive, it is good in terms of improving supply and demand conditions. In particular, expectations will be higher for large-cap stocks. I think there is good news in the short term as well. However, (value-up related stocks) have similar aspects to current high-dividend stocks. If we want to differentiate, we need to look at it from the perspective of shareholder return rate, but since domestic companies do not often buy back and burn their own stocks, in the end, only dividends remain. Then, what is the difference from current high-dividend stocks? However, it is not easy for companies to make groundbreaking business restructuring. This is why companies are also dissatisfied. It is also problematic to pay dividends when you are not making money. So I hope they focus on sustainable ROE improvement and then think about how to distribute it efficiently. It took Japan 10 years to establish value-up.
The gold investment tax has emerged as a ‘hot potato’ ahead of its implementation next year.
▶If the investment tax is implemented, it will be good for companies like ours that invest a lot overseas (*According to the supplementary investment tax package bill prepared by the Democratic Party, the basic deduction for the investment tax will be increased from 50 million won to 100 million won and overseas direct investment will be allowed from individual comprehensive asset management accounts (ISAs). However, if it is for the domestic stock market, shouldn’t it be abolished? This is just telling people not to invest in Korean stocks. Stocks are about looking at future growth potential, but the US has an ROE of over 20%. Korea (ROE 9%) is a discount country compared to the US. If you use an ISA account, you can even get a tax exemption, but doesn’t that mean you have to invest in overseas stocks unconditionally?
There is also public opinion that is concerned that the gold price hike will worsen investment sentiment.
▶If money keeps flowing out, the corporate value evaluated by stock price keeps falling. In foreign countries, when a company raises funds, the stock price of the company is also evaluated. It is based on the market capitalization. Hyundai Motors sells many more cars than Tesla, but it is evaluated differently when borrowing money in the capital market. Also, Samsung Electronics has to borrow money at a higher interest rate than Nvidia. If there is a shortage of money, it can sell stocks to secure investment funds, and wouldn’t the wealth landscape of the country change? But they are giving more incentives to invest in foreign stocks? I don’t understand this at all.
Noh Jeong-dong, Hankyung.com reporter dong2@hankyung.com
Months, foreign investors have turned net sellers in the market. Mok explains the implications of this shift and what it means for domestic investors and the overall market sentiment. How should investors interpret the actions of foreign investors during periods of increased volatility?
Table of Contents
- 1 Months, foreign investors have turned net sellers in the market. Mok explains the implications of this shift and what it means for domestic investors and the overall market sentiment. How should investors interpret the actions of foreign investors during periods of increased volatility?
- 2 – What investment strategies does Mok Dae-gyun recommend for navigating September’s stock market volatility?
September Market Volatility: CIO Mok Dae-gyun’s Expert Insights
As the Chuseok holiday approaches, investors are bracing themselves for a potentially tumultuous period in the stock market. Mok Dae-gyun, Chief Investment Officer (CIO) of KCGI Asset Management, shares his expert insights on navigating the market’s short-term responses and long-term trends.
High Volatility Ahead: Reduce Portfolio Swings
Mok advises investors to minimize portfolio swings in light of the traditionally volatile September period. With the US, China, and manufacturing indicators trending downward, and the US presidential election looming, the likelihood of trading mistakes increases. He recommends reducing trading positions and responding more cautiously than usual.
FOMC Meeting: A Key Event to Watch
The Federal Open Market Committee (FOMC) meeting this week is an event that can significantly impact the market. Mok, with his extensive experience as a fund manager, warns that moving trading positions just before the holiday can often lead to poor performance. He suggests exercising caution in response to the FOMC meeting.
Foreign Investors Turn Net Sellers: What it Means
For the first time in
September Stock Market Volatility: Expert Advice from Mok Dae-gyun, CIO of KCGI Asset Management
As the Chuseok holiday approaches, investors are bracing themselves for a potentially volatile period in the stock market. With the Federal Open Market Committee (FOMC) meeting scheduled for this week, foreign investors turning net sellers for the first time in 10 months, and the KOSPI index’s performance as low as that of China and Russia, the market is expected to be highly unpredictable.
In an exclusive interview with Hankyung.com, Mok Dae-gyun, Chief Investment Officer (CIO) of KCGI Asset Management, shared his expert insights on short-term stock market response strategies and offered valuable advice to investors. As one of the first-generation overseas fund managers in Korea, Mr. Mok has extensive experience in navigating volatile markets.
Minimizing Portfolio Swings in September
“September is traditionally a volatile period as we head into the end of the year. I would minimize portfolio swings,” Mr. Mok cautioned. With the US presidential election and manufacturing indicators in the US and China falling, investors should be prepared for high volatility. To mitigate risks, Mr. Mok advised reducing trading position sizes and responding more cautiously than usual.
FOMC Meeting and Chuseok Holiday
The FOMC meeting this week adds an extra layer of uncertainty to the market. Mr. Mok, who has managed flagship funds as a star fund manager at Mirae Asset Global Investments, has learned from experience that moving portfolios right before the Chuseok holiday often leads to poor performance afterwards. Therefore, he recommended exercising caution and avoiding significant changes to portfolios ahead of the holiday.
Foreign Investors Turn Net Sellers
Foreign investors have turned net sellers for the first time in 10 months, with most net selling coming from the IT and electrical and electronics sectors. This trend is likely driven by lowered expectations for Samsung Electronics and SK Hynix’s second-half performance. Mr. Mok advised investors to be more conservative in their outlook and lower their expectations.
KOSPI Index Performance
This year, the KOSPI index’s performance has been as low as that of China and Russia, with a price-to-book ratio (PBR) of around 0.9 times. Despite this, China still has a higher return on equity (ROE) than Korea. The supply and demand gap created by foreign investors’ exit has contributed to the sluggish performance of the domestic stock market.
Semiconductors and Biotech Stocks Sluggish
Recently, semiconductors and biotech stocks have been sluggish, and leading stocks are not visible. However, Mr. Mok believes that the AI industry will continue to grow in size and remain a driving force in the domestic stock market.
Investment Strategies for the Rest of the Year
In light of these market trends, Mr. Mok advised investors to:
- Minimize portfolio swings and reduce trading position sizes.
- Exercise caution ahead of the Chuseok holiday and avoid significant changes to portfolios.
- Be more conservative in their outlook and lower expectations.
- Focus on the AI industry, which is expected to continue
