Seven out of 10 foreign investment banks plan to increase their portion of South Korean stocks next year, citing the country’s solid economic fundamentals and low price valuation, a report showed Wednesday.

Citigroup Inc., Barclays Plc and five others said they plan to invest more in South Korean equities, while two players, HSBC Holdings Plc and Royal Bank of Scotland Group Plc, opted to scale back their stock purchases, according to the report by the Korea Center for International Finance. JP Morgan Chase & Co. had a neutral stance, it added.

Nomura Holdings Inc. said although the South Korean stock market has recently seen growing volatility, it is still an attractive option thanks to its undervaluation and solid fundamentals.

Deutsche Bank AG said South Korea’s stock market is likely to undergo ups and downs in the short term but is expected to see upward momentum in the first half of next year.

Citigroup said the benchmark KOSPI, which fell 23 percent in the third quarter, is the most undervalued bourse in Asia, recommending investors to pick up shares of local builders and telecommunications companies, according to the report.

The report, however, showed that foreigners’ appetite for local stocks waned compared with a year ago, due to global uncertainties.

Last year, nine out of 10 investment banks had said they planned to increase investment in South Korean equities.

The investment banks said the impact from the eurozone debt crisis is likely to be limited, but warned the slowing global economy could weigh down the stock market. They also said South Korea may see a slowdown in exports on declining demand from advanced countries.

Meanwhile, the investment banks forecast the KOSPI to reach the 1,975-2,040 level at the end of this year, according to the report. 

(Yonhap News)