South Korean equities may be among the cheapest in the region, but investment strategists tell CNBC that even compelling valuations are not enough to lure them back into shares given a bleak outlook for the country’s key export markets.
Shares in South Korea are trading at 8.5 times forward earnings, compared with 9.2 times in China and 13 times in Taiwan.
The country's benchmark KOSPI index, seen as a proxy for global growth due to the economy's gearing towards exports, is flat year-to-date, erasing gains seen earlier this year, due to heightened risk aversion. It is the third worst performing market in Asia so far this year, after Japan’s Nikkei 225 and China’s Shanghai Composite .
However, experts say there is little scope for the South Korean market to stage a turnaround in the second-half because corporate earnings are set to underperform expectations, as the slowdown in global growth hits demand from key export destinations: the U.S., Europe and China.
“The equity market remains susceptible to serial earnings downgrades and there is little evidence to suggest that we are close to the end,” said Sean Darby chief global equity strategist at Jefferies Group, who has been bearish on the South Koreanmarket since the first quarter of 2012.Page 1 of 3 | Next Page