Bloomberg: South Korean Stock Market Emerges as Global Bellwether Amid AI Investment Frenzy

The South Korean stock market, heavily weighted with artificial intelligence (AI) related stocks, is rapidly moving beyond its status as a peripheral market to emerge as a leading indicator for global investor sentiment, Bloomberg reported.

The report suggests that the stock price movements of Samsung Electronics and SK Hynix are influencing semiconductor stocks worldwide, thereby shaping the atmosphere of the global market.

According to a Bloomberg report on July 19 (local time), it has become a daily routine for fund managers in London, New York, and Tokyo to check the South Korean market before beginning their trading day.

Andrew Jackson, head of Japan equity strategy at Ortus Advisors, noted that earlier this year, for the first time in his 20-year career, he added the KOSPI chart to his list of items to monitor closely.

Herald van der Linde, head of Asia-Pacific equity strategy at HSBC, said that South Korea is now discussed in "every meeting" these days.

Hani Redha, a portfolio manager at PineBridge Investments in London, stated, "We are all Korean investors now," adding that he checks the South Korean market every morning to gauge AI investment sentiment.

A pattern is also emerging where trading flows influenced by South Korean investor sentiment dictate the direction of global AI stocks around the clock.

This is because interest shifts to SK Hynix's American Depositary Receipts (ADRs) and South Korea-related exchange-traded funds (ETFs) traded on the New York stock market after the South Korean market closes.

"It is effectively a 24-hour tracking" of investment sentiment related to the South Korean market, Redha explained.

This trend was particularly evident last week.

As skepticism regarding AI demand emerged, the KOSPI plunged nearly 9% in a single day on July 13, and this weakness subsequently spread to the U.S. stock market.

SK Hynix ADRs also fell 9.3%, dragging down other major semiconductor stocks.

The correlation between the South Korean and U.S. stock markets is also clearly reflected in statistics.

According to Bloomberg data, the 60-day correlation coefficient between the KOSPI and the Nasdaq 100 index is 0.46, nearing its highest level in the past two years.

This is approximately three times the five-year average of 0.16.

Ivan Finesse, Chief Investment Officer (CIO) at Tigress Financial Partners, said, "South Korea has effectively been incorporated into the same volatility ecosystem as the Nasdaq and the Philadelphia Semiconductor Index," adding that "SK Hynix, Samsung Electronics, and the KOSPI are now acting as pre-market indicators that show risks related to U.S. AI and semiconductors."

In particular, the impact on the global market appears to be more pronounced when South Korean stock prices fall.

The sensitivity of the Nasdaq 100 index to KOSPI movements during periods of weakness in the South Korean market rose to its highest level since 1990 on July 7.

However, if the sharp decline in the South Korean stock market continues, its influence could weaken again.

The KOSPI has fallen 25% since its peak in June, with approximately 1 trillion dollars in market capitalization evaporating.

The stock prices of Samsung Electronics and SK Hynix have also fallen more than 30% from their peaks.

Bloomberg also pointed out that as leveraged trading amplifies stock price fluctuations, the KOSPI has become one of the most volatile major stock indices in the world.

Kobayashi Jisa, a Japan equity strategist at UBS SuMi TRUST Wealth Management, pointed out that "as a relatively immature market with high volatility due to leveraged trading leads the market, stock prices can deviate from fundamentals, making it difficult to make trading decisions."

(Photo: Provided by SK Hynix, Yonhap News)
※ Please note: This article was translated by AI and may contain errors.