Shares I love: Soulbrain

Chetan Sehgal, lead manager of Templeton Emerging Markets Investment Trust (TEM), explains why he invests in Korean chemicals company Soulbrain (KOR: 036830).

“Soulbrain is illustrative of the improving breadth of opportunity and quality of companies in emerging markets. Although classified as an old economy chemicals company, Soulbrain has evolved to become a key supplier of essential materials to the Korean technology industry and now has a significant position in the electronic supply chain.

“Its products include high-purity chemicals such as etchant and cleaning agents, chemical mechanical polishing slurries and precursors, all of which play a vital role as a solution for process miniaturisation and reduction in abrasions. Soulbrain has also started to provide additives and electrolytes used in the production of electric vehicles. Its clients include semiconductor companies such as Samsung (KOR:005930), Hynix (KOR: 000660), organic light emitting diode display producers and electric vehicle battery manufacturers including LG Energy Solutions.

“So Soulbrain provides attractive exposure to structural trends in global innovation that are increasingly being led by emerging market corporates. Nearer-term catalysts include Soulbrain being a producer of the chemicals required for the stacking process, which is essential in the further development of 3D NAND semiconductors. And it has a key role in the advancement of gate all-around technology for Samsung’s Foundry operations. The possibility of 3D dynamic random access memory offers a longer opportunity.

“The company is now listed as a focused operating entity after the spin-off from its holding company and has better corporate governance."

Templeton Emerging Markets Investment Trust had 23.4 per cent of its assets in South Korean companies at the end of July, its second-largest country exposure after China.