Asia's emerging markets have been among the worst hit amid the recent rout in global stocks, but Goldman Sachs advocates accumulating South Korean equities now, on the basis that the market will fare well in a rising rate environment.
"In a rising rate environment...more cyclical markets like Korea may benefit given their higher sensitivity to global growth than rates," strategists at the U.S. investment bank wrote in a report published on Monday, adding that the export-driven economy will benefit from a stronger U.S. economy.
(Read More: Emerging Markets Could Snap Back, If Fed Cooperates)
While Korea's KOSPI index has not been spared from the equity selloff, it has held up better than some of its peers, according to Goldman. Since hitting its high on May 5, the MSCI Emerging Markets Index has declined almost 9 percent, while Seoul stocks have lost just 4 percent over the same period.
"The inevitable jitters regarding QE [quantitative easing] tapering are not likely to impact Korean equities as much. Note the outperformance of Korea during the recent sell-off," the bank said.
Goldman is not alone in its bullish outlook for the market. In a report published earlier this month, Citi said it's betting on South Korea to deliver big stock market gains in 2013, driven by an improvement in the economy and better corporate earnings growth in the second half of the year.
(Read More: Citi Bets Big on This Asian Market Laggard)
