TAIPEI: Investors should buy South Korea and Taiwan shares in the second half of the year to profit from a recovery among developed economies, JPMorgan Chase & Co advised.

Technology shares, accounting for about a fifth of South Korea's benchmark stock index and more than half of Taiwan's gauge, and companies that benefit from consumer spending are to be preferred, according to a report by a team of analysts led by Adrian Mowat.

"The probability of positive economic surprises is high," they said. "The leverage that can be generated from this lift in developed market growth is now being felt in Asia."

Taiwan's TAIEX index is the world's fifth-best performer this year, advancing 45 percent, while South Korea's KOSPI added 27 percent. Emerging markets account for all 10 of the world's best-performing indexes as investors bet that developing economies will emerge from the global recession first.

JPMorgan's portfolio includes Wistron Corp, the world's third-largest maker of laptop computers, and Lite-on Technology, the world's biggest maker of mobile-phone casings. In South Korea, the company is adding Samsung SDI Co, a maker of rechargeable batteries, and Doosan Infracore Co, the biggest South Korean construction-equipment maker.

The World Bank said on June 22 the global recession this year will be deeper than it predicted in March. It cut its forecast for the US this year, forecasting a 3 percent drop in the world's biggest economy, after predicting a 2.4 percent contraction in March.

JPMorgan has become more optimistic on the outlook for the US, raising its gross domestic product growth forecast to an annual 2.5 percent this quarter from an earlier estimate of 1 percent. Next year, the economy may expand 2.8 percent, the brokerage added.

Inventories are shrinking even though production is on track to rise 30 percent this quarter, a trend that is "encouraging", the research house said in the report.

Bloomberg News

(HK Edition 07/09/2009 page2)