Korean chip stocks suffer collateral damage in the war? Top-performing fund manager: Buy now while the opportunity lasts

In the recent Iran war, South Korean storage-chip stocks were hit by collateral effects, causing these stocks—even after the recent uptrend—to still trade at relatively low valuations. However, once there are signs of easing in the Middle East situation, leading chip stocks such as Samsung Electronics and SK hynix are likely to become some of the biggest gainers.

This is the view of Arjun Jayaraman, a fund manager at Causeway Capital Management. The $3.4 billion emerging-markets fund he manages has outperformed 96% of its peer funds over the past three years.

Jayaraman’s optimistic view of South Korean memory-chip manufacturers stands in sharp contrast to the views of some other investors—during the past month when fighting broke out in Iran, many fund managers trimmed their investment positions in South Korean equities.

In March this year, overseas investors net sold $17.0 billion worth of Samsung Electronics and SK hynix stocks. This drove Samsung’s share price down 23% that month and SK hynix’s down 24%, with both posting the largest single-month declines since at least 2008.

Samsung Electronics and SK hynix record the biggest monthly declines since 2008

And Jayaraman believes that when the situation in the Middle East shows “a certain degree of normalization,” foreign capital will “definitely” return.

He said, “We believe this selloff was actually a buying opportunity, so we didn’t sell any of the related stocks… For South Korean stocks—especially stocks like SK hynix—this selloff provides a very good buying opportunity.”

In the past month, Jayaraman’s fund increased its holdings in some energy stocks, such as PetroChina, to hedge the investment risks it faces in the Asian tech sector.

“From a long-term perspective, we remain very optimistic about the artificial intelligence theme. We believe this selloff is more of a buying opportunity, so we didn’t sell any of these stocks,” he said.

(Source: Caixin Global)