Not everyone is optimistic of Korean companies’ earnings prospects.

Kee Ho Sam, a Seoul-based fund manager at Dongbu Asset Management who helps oversee 13 trillion won, said it’s still too early to trust earnings estimates, as analysts could downgrade them for year-end annual earnings. For the Kospi index rebound, sales growth is necessary, he said.

Last month, South Korea’s central bank held its benchmark interest rate at a record low and lowered its estimate for gross domestic product expansion this year to 2.7 percent, from an April projection of 2.8 percent. The government announced a 10 trillion won ($8.7 billion) supplementary budget in June, mainly to create jobs and aid regional economies that will be hurt by corporate restructurings.
Shinyoung’s Huh remains optimistic.

The “extreme pessimism” that’s plagued Korean equities for years was overdone, he said. “It will easily break free from the trap when there is market consensus that it can.”

Eoin Treacy's view

There was widespread optimism that attractive relative and absolute valuations would spur outperformance by major Asian markets last year but the concurrent relative strength of the Dollar acted as a headwind which sapped demand from foreign investors. That might now be changing as expectations for Fed rate hikes have been scaled back.

The Dollar has broken a progression of higher reaction lows against the South Korean Won, Taiwan Dollar, Singapore Dollar, Thai Baht and Indonesia Rupiah. The relative weakness of the Chinese Yuan has meant the relative strength of these currencies has been less of an influence on the Asian Dollar Index which has nonetheless posted its first higher reaction low since 2014. 

The Kospi Index (P/E 17.12, DY 1.58%) has been confined to a range since pulling back sharply in 2011. A sustained move above 2100 would confirm a return to demand dominance beyond the short term. 

The Thai SET Index (P/E 20.6, DY 3.16%) is rallying towards the upper side of a four-year range. 

The Indonesian Jakarta Composite Index (P/E 27.88, 1.8%) countermanded a downside key day reversal posted Friday to extend its rally towards the upper side of its three-year range. 

The Philippines Composite (P/E 23.69, DY 1.61%) is testing its 2015 high.