SEOUL, May 30 (Korea Bizwire) — With inter-Korean ties at their high tide, asset managers in South Korea are scrambling to roll out investment funds focused on firms that may benefit from future inter-Korean economic cooperation, industry sources said Wednesday.
South and North Korea are enjoying a thaw in their relations following a couple of summits over the past month. The first summit took place at the truce village of Panmunjom on April 27, with the second occurring about a month later.
At the end of the historic April summit, the leaders of South and North Korea adopted a joint declaration that focuses on working toward a complete denuclearization of the Korean Peninsula and ending the Korean War.
It also calls for actively pursuing economic projects agreed upon in 2007, including an expansion of a joint industrial complex in the North Korean city of Kaesong. South Korea pulled the plug on the complex’s operations in February 2016 to punish the North for its fourth nuclear test and long-range rocket launch.
According to the industry sources, Hi Asset Management Co. has recently retooled its “Korea unification renaissance fund” that was rolled out four years earlier.
The fund had been concentrating in state-supported companies, including those engaging in the light industry, or builders and miners that could benefit from a unified Korea.
Hi Asset Management said it will positively reflect environmental, social and governance factors in its establishment of an investment portfolio and invest actively in stocks that could bask in inter-Korean economic cooperation stage by stage.
So far, the asset manager has had trouble attracting investors to the unification fund, despite its relatively high return rate that amounted to 6.16 percent as of Tuesday. That is much higher than the average yield of minus 0.26 percent for investment funds for other domestic stocks.
Hi Asset Management is not alone. Samsung Asset Management Co. plans to unveil a unification fund in June after streamlining an existing fund focused on large caps and blue chips.
“Smooth inter-Korean economic cooperation will have a positive impact on the domestic stock market in the long term and enable many companies to benefit from it,” a Samsung Asset Management official said.
UBS Hana Asset Management Co. has recently unveiled a unification fund that will invest in undervalued companies amid improving inter-Korean ties and stocks expected to bask in the easing of the so-called Korea discount, or the undervaluation of South Korean stocks due to geopolitical risks on the Korean Peninsula.
In addition, two more asset management companies have recently launched unification funds, with another one poised to roll out an investment fund in early July.
“Inter-Korean economic cooperation is not a one-off event, but a long-haul issue,” said Won Jong-jun, chief executive of Lime Asset Management Co. “We see a good chance since related companies may generate sales and profit if inter-Korean economic cooperation actually proceeds.”
Inter-Korean economic cooperation has been not so active amid chilly inter-Korean ties during the two previous conservative governments in the South.
The Kaesong factory park — opened in 2004 — had been hailed as a key symbol of economic cooperation between the rival Koreas as it combined South Korean capital and technology with cheap labor from North Korea.