Top-Performing Fund Says Korean Chip Stocks Hit by Middle East Conflict Are a Buy

A top-performing fund believes that even after recent gains, South Korean memory chip stocks remain inexpensive and could be among the biggest winners if the Middle East situation continues to ease. Arjun Jayaraman, a fund manager at Causeway Capital Management, stated that leading chip companies, such as Samsung Electronics and SK Hynix, are positioned to benefit most as the conflict with Iran moves toward a conclusion. The firm's $3.4 billion emerging markets fund has outperformed 96% of its peers over the past three years. "Technology sectors, particularly in Korea and Taiwan, have been hit hard, but they stand to benefit as the global situation recovers and normalizes," Jayaraman said in an interview from Los Angeles. He noted that even after a rebound in tech stocks following U.S. President Donald Trump's announcement that the U.S. would withdraw from the Iran conflict within two to three weeks, their valuations remain "compelling." Jayaraman's optimism about South Korean memory chip makers contrasts with other investors who reduced their holdings of Korean stocks during the Iran conflict. In March, overseas investors were net sellers of $17 billion worth of shares in Samsung Electronics and SK Hynix. This led to a 23% drop in Samsung's share price and a 24% decline for SK Hynix, marking their largest monthly falls since at least 2008. Jayaraman stated that when the Middle East situation returns to "some level of normalcy," foreign funds will "undoubtedly" return. "We viewed this decline more as a buying opportunity, so we did not sell any shares," he said. "For Korean stocks, particularly SK Hynix, this decline provided a very good buying opportunity." Over the past month, Jayaraman's fund increased its holdings in some energy stocks, such as PetroChina, to hedge its exposure to Asian tech companies, many of which are based in energy-importing countries. "Long-term, we remain very bullish on the AI theme. We viewed this sell-off more as a buying opportunity, so we did not sell any of these stocks," he said.