There will be continued upside for South Korean firms as the U.S. economy continues to gain momentum, says Daphne Roth, Head of Equity Research, Asia at ABN AMRO Private Banking.
South Korea, which is one of the biggest exporters to America, continues to be a "leverage play on economic recovery of the developed markets", she said.
Despite the South Korean equity market trading at a record high, Roth has an "overweight" on it, with a price target of 2,300 on the Korea Composite Index (KOSPI) over the next six to 12 months. The KOSPI closed at record high of 2130 on Tuesday.
"It's the cheapest market in this region," she told CNBC this week. According to a report by ABM Amro, the MSCI Korea trades at an attractive 2011 forward price-to-earnings (P/E) ratio of 9.4 times.
Roth likes tech-heavyweight Samsung Electronics. She says its shares, which currently trade at 9.5 times 2011 forward P/E, are "almost exactly in line" with the Korean market in terms of valuation.
She expects Samsung to benefit from the bottoming out of the D-ram chip market - a big part of Samsung's business - as demand returns and prices go up. Strong demand for Samsung's smartphones, will also boost earnings, and in turn help its flash memory business.
"Its recent launch with the Galaxy S tablet, I think that is going to continue to take market share. We are very positive on that segment as well."
Roth sees a 27 percent upside for Samsung Electronics shares. She expects the stock to hit 1.2 million won in the next six to twelve months.
Dahne Roth does not have holdings in Samsung Electronics. But ABN AMRO does have positions in the company.
