GregTheAnalyst
Independent Investor, Macro/Micro & Technical Analysis
Korean equities are a parabolic bet on just two stocks, SK hynix and Samsung, while the bond market and currency already price big problems. Even with the rally, the dollar keeps rising against the won and Korea's 10-year yield is trying to climb, following Japan's path of bond and currency stress. Per Bloomberg, Korea has stepped up monitoring of its bond market to contain rising yields. When the two stocks crash, the won and bonds could sell off faster than ever. 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
A new sell-side forecast for SK hynix's Q4 operating profit strengthens its low-valuation case. The report looks for a 40% sequential rise to $88B, up 560% year over year. SK hynix might earn over $350B in operating profit in 2027 against an $800B market cap, or about 2x EV/operating profit after accounting for cash and its Kioxia stake. It could afford to buy back half its shares over three years. 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
South Korean equities look like a bubble about to burst because the KOSPI's 3.5x rise in 12 months, from 2,500 to above 8,500, rests on just two companies, Samsung and SK hynix. An index that concentrated is a trade, not a market, and parabolic trades like this break hard. x.comÂ
SK hynix looks supported by memory demand sold out at least in 2027. Korean export figures, per unnamed sources, suggested earnings would not be too ugly. No one knows what happens after 2028, so stay flexible both ways. 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
SK hynix has unusually strong earnings visibility because it expects memory demand to exceed supply through 2030, while long-term agreements with 14 customers cover more than half of its 2027 and 2028 production capacity. Record Q3 operating profit of KRW 83.3T also beat the KRW 76.7T estimate. x.com x.comÂ
SK hynix remains a buying opportunity, with its US ADR premium over Korean shares now at an all-time low of 32.66%. x.com 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
SK hynix's earnings and buybacks could drive a tripling by 2027 before a re-rating, on Jonah Lupton's assumptions. Its Q3 report expects memory demand to outpace supply through 2030 as advanced processes and fab lead times constrain growth. It plans about KRW 100 trillion in FY2026 shareholder returns, including KRW 60 trillion or more in share acquisitions or cancellations; the buybacks would first reduce shares outstanding. x.com x.com x.com x.com x.com x.comÂ