South Korea's stock market, which surged on the artificial intelligence boom, is losing momentum in the global performance race. Its year-to-date gain has slipped to second place behind Taiwan, and over the past month it ranked only 12th. Analysts point to the burden of rising interest rates offsetting expectations for improved semiconductor earnings.
According to Investing.com's comparison of major stock indexes on the 1st, the KOSPI's year-to-date gain through the previous day stood at 62.26%, second only to Taiwan's TAIEX at 66.29%. The gap between the two is 4.03 percentage points. The KOSPI had led all major markets at one point but ceded the top spot to Taiwan as its advance slowed.
Over the past month, the KOSPI rose just 0.26%, ranking 12th among the indexes compared. Over the same period, the U.S. Nasdaq gained 1.62% and Japan's Nikkei rose 0.88%, both outpacing the KOSPI.
Foreign media also weighed in on third-quarter performance. The Financial Times reported on the 29th of last month that the KOSPI fell about 18.8% over the past three months, making it the worst performer among major global markets in the third quarter. Over the same period, China's CSI 300 index dropped 12.5% while the U.S. S&P 500 rose 2.3%.
The FT said the Korean market, which had been a concentrated beneficiary of expanding AI investment, also proved highly sensitive to shifts in investor sentiment. It cited the unwinding of leveraged hedge fund positions in memory chip stocks in July and increased volatility in single-stock leveraged exchange-traded funds as factors that deepened the correction.
The share price declines have pushed forward price-to-earnings ratios for Samsung Electronics and SK hynix down to about four to five times, but analysts said valuations are unlikely to rebound sharply. A low P/E ratio alone, they said, is not enough to determine whether a stock is undervalued.
Prashant Bhayani, chief investment officer for Asia at BNP Paribas Asset Management, said the KOSPI has become more attractive on price but that valuations are unlikely to rise as steeply as they did before. S&P Global Market Intelligence also said concerns about semiconductor oversupply could weigh on future earnings.
Rising interest rates are another drag on the index. Joshua Crabb, head of Asia-Pacific equities at Robeco, said higher bond yields could become a headwind for the Korean market, though the direct impact would be limited because chipmakers' P/E ratios are already low. The FT added that expectations remain that investment by U.S. hyperscalers and growing demand for high-bandwidth memory will support earnings improvement at Korean chipmakers.
