Daijiworld Media Network – Seoul
Seoul, Jul 19: South Korea's stock market has become an increasingly important indicator for global investors, with fund managers in London, New York and Tokyo now closely tracking Korean shares before trading begins amid the continued AI-driven rally in semiconductor stocks.
Once considered a peripheral market, South Korea's $4 trillion equity market is now offering an early gauge of global risk appetite, as movements in technology giants Samsung Electronics Co. and SK Hynix Inc. increasingly influence chip stocks worldwide.
The growing significance of the Korean market is changing investment strategies. JPMorgan Asset Management's chief Asia market strategist recently presented on Korea to the firm's global team for the first time in 14 years, while Japanese traders have begun adding the Kospi Index to their daily watchlists.
"We are all Korean investors now," said Hani Redha, a London-based portfolio manager at PineBridge Investments.
However, the market's rising influence has also brought increased volatility. The Kospi has emerged as one of the world's most volatile major equity benchmarks, with leveraged trading magnifying price swings. SK Hynix's recent US listing has further extended Korea's impact into Wall Street, allowing Korean market sentiment to shape global AI-related stocks almost around the clock.
Markets are expected to witness another volatile session when trading resumes in South Korea after a long weekend. Global semiconductor stocks declined on Friday following an unexpected breakthrough by a Chinese AI startup, which reignited concerns over heavy capital expenditure on artificial intelligence.
Redha said he begins each trading day by monitoring the Seoul market to assess the AI sector before shifting his attention to SK Hynix's American depositary receipts and Korea-focused exchange-traded funds after the Korean market closes.
"It's like almost 24-hour tracking," he said.
The close relationship between Korean and US markets was evident last week when concerns over future AI demand triggered a sharp sell-off in Seoul. The Kospi fell nearly 9 per cent before weakness spread to Wall Street, where SK Hynix's US-listed shares dropped 9.3 per cent, dragging other major semiconductor stocks lower.
According to Bloomberg data, the 60-day correlation between the Kospi and the Nasdaq 100 has risen to 0.46, close to its highest level in two years and nearly three times its five-year average of 0.16.
"Korea has effectively become part of the same volatility ecosystem as the Nasdaq and SOX, with SK Hynix, Samsung and the Kospi now functioning as a pre-market read-through on US AI and semiconductor risk," said Ivan Feinseth, chief investment officer at Tigress Financial Partners. He added that South Korea was no longer "a distant emerging-market side show."
Bloomberg data also showed that the Nasdaq 100's sensitivity to Korean market declines reached its highest level since 1990 on July 7, while a similar measure for the MSCI World Index climbed to a four-year high earlier this month.
The correlation between the Kospi and Japan's Nikkei 225 has also strengthened, prompting Ortus Advisors' head of Japan equity strategy Andrew Jackson to begin closely monitoring the Korean benchmark for the first time in more than two decades.
Herald van der Linde, head of equity strategy for Asia Pacific at HSBC Holdings Plc, said Korea now features in "all meetings", while JPMorgan Asset Management's chief market strategist for Asia Pacific, Tai Hui, said he had not presented on Korea to the firm's global team until this year.
Despite its growing global importance, the Korean market has recently come under pressure. The Kospi has fallen 25 per cent since its June peak, erasing around $1 trillion in market value, while both Samsung Electronics and SK Hynix have lost at least 30 per cent of their value. South Korea has also temporarily suspended new listings of single-stock leveraged exchange-traded products to reduce speculation and curb volatility.
Even so, the Kospi remains up 62 per cent for the year, making it one of the world's best-performing major stock markets. Given the dominant position of Samsung Electronics and SK Hynix in the global memory chip industry, analysts believe South Korea will continue to play a central role in shaping global AI investment trends.
"This is the new normal investors have to accept, as long as the AI rally continues," said Chisa Kobayashi, Japan equity strategist at UBS SuMi TRUST Wealth Management.