(Bloomberg) -- Mark Mobius, an emerging-market guru who was optimistic on South Korean stocks even when a former president was impeached, warns the simmering tensions between Korea and Japan won’t be easily resolved and investors should be prepared for that.
“We can’t see an easy resolution unless the U.S. attempts to negotiate a resolution,” said Mobius, who set up Mobius Capital Partners LLP last year after three decades at Franklin Templeton Investments. “Technology firms will thus continue to be vulnerable and investors will need to be selective and undertake extensive research to determine which companies and sectors are most vulnerable.”
Korean companies should find alternative suppliers for the key materials crucial for production of memory-chips that Japan has imposed exports restrictions on, Mobius said in an email interview, without mentioning names. “It won’t be easy, but it can be done.”
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The current spat between the two countries over issues during Japan’s colonial rule decades ago comes as a new generation of Japanese people “resent being blamed for the transgressions of their ancestors against Korea,” said Mobius. Koreans dislike Japan’s “reluctance to recognize past transgressions.”
Shares of Samsung Electronics (KS:005930) Co., the world’s largest memory-chip maker, dropped 4% this month as Japan’s government tightened restrictions on exports of semiconductor materials to South Korea.
Government officials from both sides may meet on Friday in Tokyo, the Korean trade ministry said, while Samsung Electronics Vice Chairman Jay Y. Lee flew to Japan reportedly for talks with his suppliers.
“It’s certainly not the end of the road for Korean investment,” Mobius said. “There will continue to be opportunities to invest in the Korean market but with a carefully nuanced approach.”