Ren
Head of AI, Ex-Product Manager, AI Supply-Chain Bottlenecks
Korean equities are cheap and deleveraged after a 40% drawdown that did not change their place in the AI buildout. The KOSPI is down about 40% from its June 22 peak, with RSI oversold and forward P/E and P/FCF both near 5x. Oversold and cheap are not bottom signals alone, but recovery requires them. Its leading names make the memory the AI buildout runs on, and that buildout can be profitable early: Microsoft grew operating income 18% to $40.6B while spending near $190B on capex. x.comÂ
Korean equities hold one of the most important pieces of the AI buildout, and the leverage-driven selloff is about 90% done. Leveraged ETF AUM went from roughly $8B in January to over $50B in mid-June and is back near $16B, per a JPMorgan chart, a reminder that crowded trades get punished even when fundamentals, margins and demand are there. Per @DeItaone, South Korea's finance ministry moved to stabilize the market and restrict leveraged ETF trading. x.com x.comÂ
Korean equities have a central role in the AI trade because Samsung and SK hynix supply most of the memory it needs. Despite the shakeout, the KOSPI leads the major markets shown at roughly +36% this year. The bullish lean faces a flow warning: Korean semiconductor ETF 20-day flows fell from nearly +$4B in June to about -$703M by October 18 as the index approaches rising support. x.com x.com x.com x.com x.comÂ
Korean equities are too cheap to stay compressed, with the KOSPI now cheaper than during the 2008 financial crisis. Its companies are set to make record profits for the next five years and beyond, so the index has to shoot higher. Posts the author replies to push back that the index is mostly two companies in a low-multiple industry and that today's high cyclical memory earnings make it look cheaper than it is. x.com x.com x.comÂ
Retail leverage and AI concentration have fueled the Korean equities rout. The KOSPI fell more than 14% in a week, its worst weekly decline since 2008. Korean equities will fall further if the rout in SK hynix and Samsung continues, though some dip buyers may already be lining up. x.com x.comÂ
The South Korean president's alarming appeal amid the KOSPI selloff aligns with a market bottom, not a top. The KOSPI is deep in Wave C, and its pain looks nearly over. x.comÂ
Korean equities look very attractive precisely because nobody trusts them right now. x.comÂ
Korean equities' bigger picture is concerning because breadth has collapsed, with the KOSPI held up only by two stocks that make up half the index. The KOSDAQ has erased all its gains since April 2025 and trades near six-year lows, while the KOSPI is down 46% in six weeks after twice testing its 200-day average. A short-term bounce of about 20% to fill this week's gap is possible. x.comÂ
Korean equities' July leverage-driven flush increasingly looks like exhaustion, not a failed AI thesis. The KOSPI rose 3.56% to 6,813, back in bull-market territory more than 20% above its July low, with Samsung up over 5% and SK hynix nearly 8% on reported sovereign-wealth interest and reaccelerating global AI capex. Korean semiconductor exports are running up 155% year over year in early August. x.comÂ
Korean equities' 2026 crashes were forced-liquidation flushes, not a broken thesis, and memory earnings and exports will carry KOSPI back up. All four circuit-breaker days came from external or technical shocks, a war-driven oil spike, a crowded AI unwind and foreign outflows, amplified by record retail margin debt above 38tn won; none came from Korean earnings breaking. SK Hynix just posted record revenue at a 72% operating margin. The real risk is the memory cycle itself rolling over. x.comÂ
The PCE release will knock the bottom out of the KOSPI. The index already looks about to erase yesterday's gains. x.comÂ
Korean equities are probably going higher as Samsung and SK hynix move toward capital returns while memory fundamentals strengthen. Multiple banks share the Samsung capital-return thesis, SK hynix says returns are imminent, both cite strong demand and long-term agreements, and Apple says memory prices will rise a lot next quarter. With froth and leverage cleared and hyperscaler revenue accelerating, a healthier rally looks likely, depending partly on a reasonable Iran resolution. x.com x.com … Show more
