HSBC Upgrades South Korea Stocks to Overweight as Correction Unwinds Excess Leverage
Summary
- HSBC said it upgraded its view on South Korean stocks to overweight after a recent correction largely unwound excessive leverage.
- HSBC said volatility in the South Korean stock market remains high but has fallen from recent peaks, while debt-fueled retail investing has eased pressure on the market.
- HSBC said continued strong performance in South Korean equities could bring selling by active funds and issues tied to investment limits, but that neither is likely to become a key barrier to further gains if domestic investor demand remains firm.
Forecast Trend Report by Period
HSBC upgraded South Korean equities to overweight from neutral, saying a recent market correction has largely unwound excessive leverage.
Odaily reported on August 19 that HSBC raised its recommendation on South Korean stocks.
The bank said volatility in the South Korean market remains elevated but has retreated from recent highs. The pullback also eased pressure on the market as debt-fueled retail investing declined.
HSBC said continued strong gains in South Korean equities could prompt selling by some active funds. Those funds face limits on how much they can allocate to a single country or stock, meaning funds already heavily exposed to South Korean shares may have little room to add positions.
The bank added that those investment caps could result in continued selling. Still, HSBC said that would be unlikely to become a major obstacle to further gains if demand from domestic investors remains solid.
JOON HYOUNG LEE
gilson@bloomingbit.ioCrypto Journalist based in Seoul