Brokers favour South Korea's worst-performing shipbuilders

South Korean shipbuilders, this year's worst-performing industry group, are attracting buy recommendations from three of the nation's biggest brokerages after valuations sank to record lows.

Hyundai Heavy Industries, Samsung Heavy Industries and three other listed shipbuilders lost an average 40 per cent in the year so far, compared with a 0.1 per cent gain in the Kospi 200 Index. The shares trade at 0.7 times net assets, against a multiple of 1.1 for the Kospi 200.

While a strengthening won and falling ship prices spurred the industry's biggest second-quarter loss since at least 2010, bulls from Hana Daetoo Securities to JP Morgan Chase say the worst is over as new container vessel orders replace older unprofitable contracts.

China, the world's biggest exporter, reported a bigger-than-estimated jump in overseas shipments last month while a measure of commodity shipping rates jumped 50 per cent from this year's low.

"The only way they can go now is up," said Park Moo-hyun, an analyst at Hana Daetoo Securities. "Earnings can't get any worse than the second quarter. The bright side is that there is still strong demand for new ships."

While shipbuilding's importance to the economy has diminished since the 1970s, the nation's 10 biggest shipyards still employed 183,022 people last year.