Table of Contents
Korea strategy bullets ....................................................................... 4
Korea snapshot .................................................................................. 5
Higher levels towards FY09-end ...................................................... 6
Market strategy – Upgrade to Overweight with new 2009-end targets for KOSPI and MSCIKorea
of 1,830 and 510, respectively........................................................................................6
More drivers to boost the market beyond liquidity rush ...........................................................7
Strong 1H09 rally – Outcome of combination of sentiment/liquidity and hard fundamental
profit delivery ............................................................................................................................8
Positioning ahead of 2H09E’s +69% HoH/+109% YoY earnings growth for Korea................10
Export cycle turning with faster turnaround in G7 macroeconomy – Buy leading cyclical
exports for cyclical/structural upside.......................................................................................13
Korea’s foray into uncharted territory of global branding-driven market share gain at the cost
of Japanese peers...................................................................................................................16
Currency vs. KOSPI – Continuous KRW appreciation positive (not negative) for KOSPI without
hurting exporters.....................................................................................................................21
Korea is under-owned by foreign investors despite decent earnings outlook relative to other
Asian countries .......................................................................................................................21
Valuation still a bit stretched ......................................................... 24
Our new KOSPI and MSCI-Korea Index 2009-end targets are 1,830 and 510, respectively....24
PER comparison with EPS growth shows Korea is undervalued among Asian peers ............26
ROE-adjusted PBR comparison also shows Korea is undervalued among Asian peers..........27
Sector recommendations ............................................................... 29
Deutsche Bank Korea 12 portfolio.................................................. 31
Sector outlook and strategy........................................................... 34
Autos - Overweight (Positive) .................................................................................................34
Oil refining: Underweight (Negative).......................................................................................36
Petrochemical: Underweight (Negative) .................................................................................38
Shipbuilding – Underweight (Negative) ...................................................................................42
Transportation - Neutral ..........................................................................................................44
Telecoms – Still generally Neutral ...........................................................................................46
Food & beverage / consumer goods – Selective approach.....................................................49
Retail – Overweight on a discount store play..........................................................................53
Semiconductor – Overweight (Positive)..................................................................................55
LCD: Slightly Overweight (Positive) ........................................................................................58
Technology Hardware & Equipment: Overweight (Positive) ...................................................59
Construction - Neutral .............................................................................................................61
Steel – Overweight .................................................................................................................63
Utility – Neutral........................................................................................................................65
Insurance (Overweight)...........................................................................................................67
Brokerage (Neutral) .................................................................................................................70
Banks (Overweight).................................................................................................................74