Kospi climbed 5% today; Korean index now up 127% in 1 year; here's why

Asia's best performing major index, Kospi, climbed 5 per cent on Wednesday, taking its three-day rise to 8 per cent. Many index stocks such as Samsung Electronics, SK Hynix Inc, LG Energy Solution Ltd and Hyundai Motor Company Ltd climbed 4-9 per cent, ahead of the outcome of two-day US Fed policy outcome. Stocks such as SK Square, Samsung Biologics, Doosan Enerbility Co and Kia Corporation rose up to 7 per cent, as the index recouped recent losses.

Kospi has gained 127 per cent in the past one year, leading Asian markets, on memory super cycle, reduction in domestic and tariff uncertainties, and market reforms. Japan's Nikkei has risen 45.96 per cent, China's Shanghai Composite climbed 18.46 per cent, Hong Kong's Hang Seng 5 per cent and Taiwan's Taipex has soared 54.23 per cent in the past one year. The NSE barometers Nifty and Sensex advanced 4.38 per cent and 2.13 per cent, respectively, during the same period.

UBS recently said Korean stocks looked attractive as there is little evidence of a slowdown in global demand for memory chips, with prevailing forecasts pointing to one of the largest supply shortages in history for both DRAM (Dynamic Random Access Memory) and NAND. UBS said the upcycle is likely to extend well into 2027.

UBS noted that recent volatility in Korean stocks reflected technical unwinds rather than a deterioration in fundamentals. It said while South Korea’s technology sector recently led the recent drop, with SK Hynix and Samsung among the hardest hit, the selloff reflected broad de-risking and technical unwinds rather than any deterioration in underlying fundamentals.

"This is strongly supported by the latest export data: In February, South Korea's semiconductor exports surged by 22.5 per cent month on month and an extraordinary 262 per cent year on year, underscoring the resilience and global competitiveness of South Korean chipmakers," it said.

UBS said DRAM prices could see another robust increase, potentially exceeding 40 per cent quarter on quarter in the June quarter. UBS last month said India was rated underweight in its emerging markets universe, with the country commanding higher valuations for earnings growth that was not very different from the rest of EM.