Global investors are shifting capital from the US to Asia as monetary easing and a weaker dollar erode the appeal of US assets, according to market strategists and asset managers.
“Over the past several years, global funds have flowed overwhelmingly into the US. Now they are moving back into Asian markets,” Timothy Moe, Goldman Sachs’ chief Asia-Pacific equity strategist, told the Korea Investment Week 2025 conference on Wednesday. “In a rate-cutting cycle, investors are reallocating into markets such as Korea.”
Moe forecast that the US Federal Reserve would lower rates by 25 basis points three times this year and twice more by June 2026.
Such moves, he said, would create room for Asian central banks to follow suit, fueling a regional liquidity rally.
“Our models show the Korean market is one of the biggest beneficiaries of dollar weakness,” he said, adding that Korea ranks among Goldman’s “most preferred” markets.
Korean asset managers echoed that view.
“US regulators are loosening banking rules, which is already providing liquidity. Overseas capital will continue to buy into Korean equities,” said Kim Tae-hong, chief executive of Growth Hill Asset Management.
KOREA DISCOUNT FADING
Speakers at the KIW 2025 forum, organized by The Korea Economic Daily and Korea Investment & Securities Co., said that the long-standing “Korea discount” – the gap between Korean valuations and global peers – is poised to narrow.
“This is a global liquidity explosion similar to what we saw in 2008 and 2020,” said Darren Kang, chief executive of Life Asset Management. “All major capitalist economies are simultaneously easing fiscal and monetary policy. That is what is propelling markets higher.”
Kang described the current rally as unlike any in his 18-year career as a fund manager.
While the Kospi index has surged past an all-time high of 3,400 points, he noted that the benchmark’s price-to-earnings multiple, or PER, is still below 12, cheaper than Japan’s 17 and the emerging-market average of 14.5.
“Korean equities remain the cheapest in the world. With the right policies, the government’s target of Kospi 5,000 is not impossible,” he said.
Valuation tailwinds are reinforced by structural reforms.
Kang pointed to recent amendments to commercial law that have curtailed split listings and convertible bond issuance, leading to the first contraction in the number of listed shares since Korea’s founding.
“If the government reverses its retreat on dividend tax reforms, the undervaluation situation will be solved even faster,” he added.
IMPROVINTG CORPORATE GOVERNANCE
Korean fund managers also highlighted governance improvements.
“The Korea discount will soon be a relic,” said Kim Ki-baek, senior manager at Korea Investment Management Co. “As corporate founders step aside and succession takes place, companies are being forced to respect shareholder rights. Dividend payouts will inevitably rise.”
The changing corporate culture, he said, will align the interests of controlling families and minority shareholders, supporting higher valuations.
‘IRREPLACEABLE’ KOREAN FIRMS
Market experts pointed to sectors already powering the rally.
“Shipbuilding orderbooks are full, nuclear power is at the beginning of a global upcycle, and defense spending is structural,” said Growth Hill’s Kim.
He also named SM Entertainment Co., Sanil and Wonik IPS Co. as examples of dividend-growth stocks combining stable payouts with earnings momentum.
Kang Ja-in, head of domestic investment at Assetplus Investment Management Co., advised investors to focus on Korean industries with unique positions in global supply chains.
“The Korean market used to be defined by semiconductors. Now it is undergoing structural change, with a line-up of future global leaders across defense, power equipment and entertainment,” he said. “Foreigners are drawn to Korea’s irreplaceable industries.”
By Han-Shin Park, Jiyoon Yang and Su-Ji Na
phs@hankyung.com
In-Soo Nam edited this article.
