HSBC has upgraded Korean stocks to overweight from neutral, citing promising growth prospects in the memory sector along with government efforts to enhance valuations.
According to strategists at HSBC, laggards in the memory sector are expected to catch up with the overall tech rally, which will likely drive performance in the upcoming quarters. The Value-up Program initiated by the Korean government to encourage companies to increase shareholder returns is also highlighted as a factor that will maintain the spotlight on Korean equities. As a result, HSBC has raised its target on the Kospi Index by approximately 5% to 3,050 points.
The recent surge in the Kospi Index to its highest level since early 2022 has been attributed to the growing excitement around artificial intelligence, particularly benefiting chipmakers like Samsung Electronics Co. and SK Hynix Inc. Additionally, regulatory guidelines aimed at enhancing shareholder returns and corporate governance are anticipated to help elevate the currently subdued valuations in the market.
On the other hand, HSBC has downgraded Indonesian equities to neutral from overweight due to challenges such as high interest rates and weak foreign exchange rates impacting earnings. The uncertainty surrounding government policies, particularly amid potential changes to the cabinet in the near term, has also contributed to this decision. Indonesia’s JCI Index has already dropped by over 7% from its recent peak, with foreign investors reducing their exposure accordingly.
Looking ahead, the brokerage firm has maintained its overweight rating on Chinese stocks, emphasizing the potential boost that may arise if Beijing takes steps to restore confidence in the struggling real estate sector. However, HSBC remains underweight on both Taiwan and Japan, citing concerns related to valuations in these markets.
With a focus on the memory sector’s growth opportunities and government initiatives to enhance valuations, HSBC’s latest ratings adjustments reflect the evolving landscape of Asian equities and the strategic considerations for investors in the region.
