[Weekend Money] "Developed Markets Index to Rise Further in June... US > Europe > Japan"

Korea Investment & Securities Releases June Developed Markets Strategy Report
"Further Upside Potential Remains... IT Is the Most Preferred Sector"

According to a recent analysis by domestic securities firms, the developed markets index in June still has additional room for growth. In terms of regional investment attractiveness, the United States, Europe, and Japan were ranked in that order. The most favored sector is IT.

Bowon Choi, a researcher at Korea Investment & Securities, stated in the recent report "June Developed Markets Strategy: Footprints Revealed as the Fog Clears" that, "despite the upcoming SpaceX IPO, a concentration of major central bank meetings, a heightened possibility of policy rate hikes in Europe and Asia, and delays in final negotiations between the United States and Iran, expectations for mid- to long-term earnings improvement at large companies are rising due to the diversification of artificial intelligence (AI) services."

AFP Yonhap News

Choi noted, "While the pressures of high oil prices and inflation persist, governments in major countries such as the United States, Europe, and Japan are urgently announcing policies to support various growth industries." He added, "It is also expected that more active measures are being taken to address high inflation."

He further analyzed, "In addition to some semiconductor companies, expectations for earnings improvement are rising for firms in network equipment, security, and space, which are anticipated to benefit from expanded government support." He continued, "Even in countries facing a heavy burden from policy rate hikes, policies to support growth industries and address high inflation are being actively introduced, which will further drive index growth."

By region, Choi assessed the United States as having the highest investment appeal, followed by Europe and Japan. He explained, "in the United States, expectations for mid- to long-term performance improvement at various growth companies have increased, and large-scale government support is underway." He added, "After the SpaceX IPO and the conclusion of the Federal Open Market Committee (FOMC) meeting, the easing of uncertainties could also drive the index higher." He also noted, "With the likelihood of Russell 2000 companies being included in the Russell 1000 increasing and index rebalancing nearing completion, investor sentiment for risk assets is expected to improve."

As for Europe, Choi predicted that its short-term investment appeal would be higher than Japan's. He explained, "Inflation is high in major Eurozone countries such as France, and the possibility of policy rate hikes is becoming more prominent." However, he added, "The financial sector has a high weighting, and favorable policies are being announced for AI and infrastructure companies. In addition, a diverse range of companies could see buying inflows in the event of U.S.-Iran negotiations, which further boosts Europe's investment attractiveness in June."

Choi also diagnosed that, "Japan still has further upside potential, but in June, the uncertainty surrounding the central bank and the Sanae Takaichi cabinet's policies is likely to intensify, making it a lower-priority market." However, he maintained that a strategy focused on semiconductor equipment and financial stocks remains valid. He added, "Investors should also broaden their attention to infrastructure and consumer goods companies, which are expected to benefit significantly from policy support."

IT was identified as the most preferred sector. Choi explained, "In the United States, Europe, and Japan, policies aimed at stabilizing supply chains are being urgently announced." He continued, "Governments have also announced plans to support IT firms beyond just semiconductor companies, and large corporations are showing relatively solid performance." The next preferred sectors were industrials and financials. For Europe and Japan, he also recommended paying attention to consumer goods companies.

Furthermore, for U.S. stock picks in June, Choi recommended IT and communication firms such as Nvidia, Alphabet, Cisco, Analog Devices, and Datadog. He said, "Power infrastructure companies, which saw only limited rebounds in May, will also attract renewed attention," adding, "I include Eaton and GE Vernova. Among financial companies, FactSet is also added to the list."

For Japan, Choi recommended semiconductor equipment firm Advantest, infrastructure and equipment companies such as Fujikura, Fujifilm, and Yaskawa Electric. Among trading companies, Mitsui & Co. was included due to its relatively limited valuation burden, and among financial companies, Fukuoka Financial Group was named.

This content was produced with the assistance of AI translation services.