A recent slide in South Korean financial shares following political turmoil is an opportunity to buy, according to analysts at JPMorgan Chase & Co., as banks are expected to continue their efforts to boost shareholder returns.
A gauge tracking Korean bank stocks fell as much as 5.3%, taking its two-day slide to more than 9%. Shares of KB Financial Group, parent of the nation’s biggest lender, tumbled 9.2% on Thursday, while peers Shinhan Financial Group and Hana Financial Group lost more than 4%.
Lenders have borne the brunt of the recent market selloff on concerns over the future of the “Corporate Value-Up” program. The initiative is part of the current administration’s flagship policy to tackle the perennial markdown of stock market valuations and punters view financial shares as a proxy for betting on improved returns.
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While the legislative process required for more effective Value-Up programs could lose steam for now, “individual companies’ efforts will likely continue to meet operating and shareholder return targets, responding to more vocal investors than before,” JPMorgan analysts including Jihyun Cho wrote in a note.
“We view the near-term pullback as a re-entry point,” they wrote, adding that the brokerage maintains overweight ratings on Hana Financial, KB Financial and Shinhan Financial on valuation merit and shareholder returns.
Bank shares have rallied this year as their relatively low price-to-book ratios helped raise expectations that the sector would be a key beneficiary of the government’s reform push. The sub-gauge reached more than a six-year high on Dec. 3 — before President Yoon Suk Yeol’s brief imposition of martial law shook financial markets.
“Rather than having a blanket concern on the political scene, we focus on banks’ sticky earnings profiles and sufficient capital buffer, especially in large banking groups, to support payout hikes,” JPMorgan analysts added.
With assistance from Youkyung Lee and John Cheng.
This article was generated from an automated news agency feed without modifications to text.
