Korea/Asia, Events, IPOs, Douglas Research Advisory

Douglas Kim

Nearly 25 years of experience in analyzing hundreds of companies, especially in Asia. Deep expertise in the following sectors:
- Technology (E-commerce, SaaS, Internet)
- Consumer 
- Special Situations/Deep Value Plays
- Holdcos/Stubs
- Asian Unicorns/Private Companies

Korea/Asia, Events, IPOs

Korean Stock Market Sectors 2018 Review & 2019 Outlook

Korean Government and Hyundai Motor Group's Grand Ambitions to Expand Hydrogen Fuel Cell Vehicles

Thematic (Sector/Industry)

Korean stock market declined again in December. KOSPI was down 2.7% in December and completed 2018 with a decline of 18% this year. Investors remained cautious preferring to increase their capital allocation to defensive sectors such as utilities. However, December was a bit unusual in that KOSPI declined much less than the US market (S&amp;P 500 was down 9% in December). In the past few months, there has been a noticeable outperformance of numerous emerging markets stocks relative to the US stock market.
Fool me once, fool me twice, fool me three times? It has been 10 years since the last Great Repression. Unlike in 2008, when the US Fed Fund rate plummeted from 4.1% in the beginning of the year to 0.09% at the end of the year, the US Fed Fund rate kept climbing throughout the year. The share price declines in global equity markets around the world this year are probably reflecting the concerns about a potential recession in the next two years. 
<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/074/073/original/three.PNG?1545965966" class="editor-image img-responsive" data-smartkarma-image-id="74073"></figure>
<div class="content-caption">US Fed Fund History (Source: <a href="https://www.macrotrends.net/2015/fed-funds-rate-historical-chart" target="_blank">https://www.macrotrends.net/2015/fed-funds-rate-historical-chart</a>)</div>
Our model portfolio was down 2.0% in December (cash is 30% of model portfolio), outperforming KOSPI which was down 2.8% in December. Starting January 2019, we are increasing the cash portion to 35% of the model portfolio, to become more defensive in capital allocation. 
The top 10 events impacting the Korean stock market, economy, &amp; politics in December were as follows:
<ul>
<li>Global markets volatility</li>
<li>Growing concerns about the declining memory prices on the semiconductor sector</li>
<li>Investors trying to find next HanjinKal</li>
<li>Hyundai Motor Group and Korean Government's Big Push into Hydrogen Fuel Cell Vehicles </li>
<li>Jim Rogers &amp; Ananti</li>
<li><a href="https://www.straitstimes.com/world/europe/eu-strikes-deal-to-cut-car-co2-emissions-by-2030" target="_blank">The EU agrees to cut carbon emissions from cars by 37.5% by 2030</a></li>
<li>Amorepacific's strong rebound</li>
<li>Korean prefs vs. common</li>
<li>Samsung Biologics trades again</li>
<li>Naver's surprising stock option plan</li>
</ul>
<hr>
The top three reports we wrote in December related to the Korean market were as follows (in terms of views &amp; appreciates): 
<ul>
<li><a href="https://www.smartkarma.com/insights/review-of-our-ipo-research-in-2018-change-in-our-ipo-research-process-for-2019" target="_blank" data-smartkarma-citation="insights:26517">Review of Our IPO Research in 2018 &amp; Change in Our IPO Research Process for 2019</a></li>
<li><a href="https://www.smartkarma.com/insights/top-seven-korean-stocks-for-corporate-activists-in-2019" target="_blank" data-smartkarma-citation="insights:26542">Top Seven Korean Stocks for Corporate Activists in 2019</a></li>
<li><a href="https://www.smartkarma.com/insights/korean-stock-market-sectors-2018-review-2019-outlook" target="_blank" data-smartkarma-citation="insights:26891">Korean Stock Market Sectors 2018 Review &amp; 2019 Outlook</a></li>
</ul>

Korean stock market declined again in December. KOSPI was down 2.7% in December and completed 2018 with a decline of 18% this year. Investors remained cautious preferring to increase their capital allocation to defensive sectors such as utilities. However, December was a bit unusual in that KOSPI declined much less than the US market (S&amp;P 500 was down 9% in December). In the past few months, there has been a noticeable outperformance of numerous emerging markets stocks relative to the US stock market.
Fool me once, fool me twice, fool me three times? It has been 10 years since the last Great Repression. Unlike in 2008, when the US Fed Fund rate plummeted from 4.1% in the beginning of the year to 0.09% at the end of the year, the US Fed Fund rate kept climbing throughout the year. The share price declines in global equity markets around the world this year are probably reflecting the concerns about a potential recession in the next two years. 

US Fed Fund History (Source: https://www.macrotrends.net/2015/fed-funds-rate-historical-chart)
Our model portfolio was down 2.0% in December (cash is 30% of model portfolio), outperforming KOSPI which was down 2.8% in December. Starting January 2019, we are increasing the cash portion to 35% of the model portfolio, to become more defensive in capital allocation. 
The top 10 events impacting the Korean stock market, economy, &amp; politics in December were as follows:

Global markets volatility
Growing concerns about the declining memory prices on the semiconductor sector
Investors trying to find next HanjinKal
Hyundai Motor Group and Korean Government's Big Push into Hydrogen Fuel Cell Vehicles 
Jim Rogers &amp; Ananti
The EU agrees to cut carbon emissions from cars by 37.5% by 2030
Amorepacific's strong rebound
Korean prefs vs. common
Samsung Biologics trades again
Naver's surprising stock option plan


The top three reports we wrote in December related to the Korean market were as follows (in terms of views &amp; appreciates): 

Review of Our IPO Research in 2018 &amp; Change in Our IPO Research Process for 2019
Top Seven Korean Stocks for Corporate Activists in 2019
Korean Stock Market Sectors 2018 Review &amp; 2019 Outlook


Hyundai Home Shopping Network (057050 KS)

Korea Stock Market Monthly Recap #31 (December 2018)