Macro_Lin
Semiconductor Analyst, AI Chip Design, Ex-Quant/Portfolio Manager
Emerging-market stocks are outperforming because of where AI capex lands, not a weak dollar. US cloud spending flows to wafers, HBM, packaging, ASIC design and rack power from TSMC, Samsung, SK hynix, MediaTek and Delta Electronics; Korean stocks led despite a 12% won slump. Cap weighting amplifies this, as those names near a quarter of the index. EM trades at about 12x forward earnings versus 20x for developed markets, and Morgan Stanley sees 40% EPS growth in 2026. x.com x.comÂ
Global markets are tracking 2017 closely, with stocks rising and emerging markets clearly stronger, and that call is still playing out. The new US Section 301 tariffs mainly replace the 10% global tariff expiring July 24: countries that ban forced-labor imports, such as Canada, Mexico, the EU, Taiwan and the UK, stay at 10%, while China, Japan, South Korea, India and others rise to 12.5%. Section 301 has no time or rate limit, but the impact looks small for now. x.com x.comÂ
Emerging-market equities are an alternative way to play the memory rally as individual memory stocks such as Sandisk and Micron become expensive. Options on the emerging-markets index offer substantial potential gains without the hefty premiums memory options now carry, with plenty of liquidity in longer-dated contracts. The index's top holdings are essentially TSMC and South Korea, and it is breaking into all-time highs from levels last seen in 2007. 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
Emerging-market stocks are much weaker than the index suggests: excluding the top three stocks, the emerging-markets ETF is heavily down. As Scott Charts notes, Taiwan now has a bigger weight than China despite a far smaller economy, and Samsung and SK hynix together outweigh all of India. x.comÂ
Emerging-market equities, especially China and Latin America, are early in a multi-year rotation away from the US, with better macro, faster earnings growth and cheaper valuations. The US is taking on EM traits, including strikes amid nuclear talks, attacks on Fed independence and big deficits, yet keeps a premium. EM earnings may grow 21%-29% versus 13%-14% in the US, Brazil trades near 9x CAPE, and US institutions barely own China. The Hormuz-fueled commodity super-cycle adds to it. x.comÂ
Korean equities get double-hit in a liquidity flush, when the dollar rises and everything else falls as investors raise cash at once. The stronger dollar creates a currency drag, and the AI memory premium in SK Hynix and Samsung reprices when the Nasdaq 100 drops 2.7%. A post the author replies to warns that Korea falling would hurt the memory trade in a big way. 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
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
Korean equities are a long as renewed optimism about the AI trade drives a record 15% jump. x.comÂ
Korea's cheap headline valuation is an illusion created by the heavy weight of cheaply valued memory makers Samsung and SK hynix. Strip those two out and the Korean market would trade at a premium to the global market. Benchmarks built on the median of each market's top 20 companies give a more objective picture than @RJCcapital's point that the Kospi forward P/E is at its lowest since the financial crisis. x.com x.comÂ
China's domestic market lets YMTC and CXMT threaten Micron, Samsung Electronics and SK hynix without entering US products. China receives 15-25% of smartphones and PCs and is on a path to at least 20-30% memory share over the next several years; current leaders are much too optimistic. History suggests at least a near-term semiconductor rally even if the AI trade has topped. It likely has not: agentic AI should give the trade room to run into 2027. x.com x.com x.comÂ
