Bae Jae-kyu, president of Korea Investment Management, delivers a welcoming speech at the listing ceremony for the ACE Semiconductor Plus Strategic Industries fund held in Yeouido, Seoul, on the 10th. Photo=Korea Investment Management
Bae Jae-kyu, chief executive of Korea Investment Management, renewed a warning against leveraged investing aimed at short-term gains.
“Many people are investing in cheap stocks or leverage to make money right now,” the CEO said. “You should invest in a way that makes time work in your favor.”
On the 30th of last month, Bae wrote on Facebook that single-stock leveraged exchange-traded funds (ETFs) — cited as a factor behind wider volatility in the domestic stock market — were “best avoided.” Rather than delisting them, the CEO said, they should be “allowed to die a natural death.”
Speaking at a seminar on the 10th marking the listing of a new ACE ETF, Bae said, “Investing is a function of direction and time.” He added, “Even when investing in domestic stocks, you should build a portfolio centered on strategic industries with global competitiveness.”
Korea Investment Management will list the ACE Semiconductor Plus Strategic Industries ETF, which reflects that investment philosophy, on the 11th. The fund spreads investments across four core Korean industries with global competitiveness — semiconductors, shipbuilding, defense and nuclear power — plus one strategic industry with strong growth potential. It was designed based on an investment strategy conceived by Bae himself.
“There is the KOSPI 200 for investing in domestic companies, but that is investing in Korea’s present,” Bae said. “To invest in future industries with growth potential and competitiveness, we put advanced manufacturing sectors with well-developed ecosystems into a single portfolio.”
The ACE Semiconductor Plus Strategic Industries fund holds at least 40% in semiconductors and permanently includes shipbuilding, defense and nuclear power. On top of that, it selects one additional strategic industry through a quantitative assessment weighing industry keywords (50%), industry size (20%) and government policy (30%). The additional industry is reviewed each quarter against major domestic sectors such as automobiles, secondary batteries, pharmaceuticals, biotechnology and entertainment, and rotated accordingly. At the time of listing, the additional strategic industries are automobiles and humanoids.
Lee Sun-yeop, chief executive of AFW Partners, also named semiconductors, shipbuilding, defense and nuclear power as leading industries set to drive structural growth in the Korean stock market. His view is that because these industries have built distinctive entry barriers amid the U.S.-China contest for supremacy and the reshaping of global supply chains, they can sustain continued profit growth rather than one-off gains.
“Semiconductors have established themselves as essential infrastructure in the race for supremacy in artificial intelligence (AI), moving beyond the framework of a traditional cyclical industry and entering a phase of re-rating,” Lee said. He forecast that shipbuilding, on a long-term supercycle; defense, on rising global military spending; and nuclear power, on growing electricity demand from AI data centers, would continue to grow structurally.