The stock market that outpaced Nasdaq’s dotcom-era gains

{"text":[[{"start":10.95,"text":"South Korea’s main stock market index has more than tripled in less than 18 months — six months faster than the Nasdaq Composite at the peak of the dotcom bubble — as the country’s army of retail investors pours cash into the Kospi."}],[{"start":25.4,"text":"The rally, since the start of 2025, has been powered by the country’s two largest listed companies, Samsung Electronics and SK Hynix, as surging demand from AI hyperscalers for their memory chips pushes their profits to record levels."}],[{"start":41.65,"text":"Samsung shares have risen about 130 per cent this year while SK Hynix has gained almost 170 per cent. "}],[{"start":49.7,"text":"Despite the Kospi’s 72.6 per cent gain this year, investment banks remain bullish on the market, with Goldman Sachs, Citigroup and JPMorgan all upgrading their target levels for the Kospi in recent weeks."}],[{"start":null,"text":"

"}],[{"start":63.25,"text":"The closest analogue to South Korea’s bull run is the dotcom bubble in the late 1990s, when the tech-heavy Nasdaq tripled in value in two years before peaking in early 2000."}],[{"start":75.35,"text":"The Nasdaq went from 1,574 points at the start of 1998 to 5,132 points before the crash, while the Kospi began last year at 2,401 points and closed on Tuesday at 7,272 points. "}],[{"start":94.55,"text":"Analysts say that the rally under way in Korea is more sustainable."}],[{"start":98.7,"text":"“What is different is that dotcom was very multiple driven — this has been very earnings driven so far,” said Cameron Chui, Asia equity strategist at JPMorgan Private Bank."}],[{"start":109.55,"text":"However, the earnings growth and rally have been concentrated in Samsung and SK Hynix. "}],[{"start":115.6,"text":"Joshua Crabb, head of Asia-Pacific equities at Robeco, said South Korean equities were now better value despite the Kospi’s surge. “On an earnings basis it looks like Samsung and Hynix are quite cheap . . . that’s what makes this difficult.”"}],[{"start":129.65,"text":"He added: “It’s hard to make the statement that it’s a super-expensive bubble. Could this go on for another three, six, 12 months? It’s possible.”"}],[{"start":null,"text":""}],[{"start":138.35,"text":"HK Kim, executive director at Tcha Partners, a Seoul-based asset manager, said: “Except for the two stocks, the rest of the market has not been so impressive, while so-called value stocks are actually underperforming because tech stocks are absorbing most of the market liquidity.”"}],[{"start":155.04999999999998,"text":"Samsung and Hynix now have a combined market value of roughly $2tn — greater than Korea’s GDP of $1.93tn, according to IMF estimates. "}],[{"start":166.74999999999997,"text":"CW Chung, joint head of Asia-Pacific equities research at Nomura, estimated the combined profits of Samsung and SK Hynix could reach Won600tn this year. "}],[{"start":178.24999999999997,"text":"The memory chip sector driving the rally has historically suffered from boom-and-bust cycles. Some analysts and investors argue that the demand from the global AI build-out is changing the nature of the industry. "}],[{"start":190.49999999999997,"text":"“This is not the typical memory cycle that we are experiencing,” said Alvin So, an Asia equity and index strategist at Goldman Sachs. “I think there’s a structural change.”"}],[{"start":null,"text":""}],[{"start":201.29999999999998,"text":"Overall valuations for Korean stocks remain cheap relative to their earnings. The Kospi trades at 8.6 times forward earnings compared with 21.2 times for the S&P 500 index, according to Bloomberg. About half of listed Korean companies have price-to-book ratios of less than one, meaning their shares are trading below book value."}],[{"start":223.14999999999998,"text":"Kim expects small- and medium-cap stocks to gain ground in the second half of the year as the government continues to push for governance reforms. The ruling party is trying to pass a bill requiring companies with low price-to-book ratios to disclose their plans to increase their values."}],[{"start":239.45,"text":"“For a more balanced and sustainable rally of the Korean market, we also need re-rating of small-to-mid-cap shares across the board, which can reduce the market’s heavy reliance on the chip sector,” Kim said.  "}],[{"start":250.79999999999998,"text":"One driver of this year’s rally has been the return of South Korean retail investors to their home market — particularly to shares of Samsung and SK Hynix — that they had shunned for years in favour of US stocks."}],[{"start":264.54999999999995,"text":"“There are not many alternatives to semicon stocks as the rest of my stock portfolio is in the red,” said Bae Sung-hoon, a 53-year-old civil servant. “I’ll hold on to them as the current upcycle in the semicon industry is likely to continue.”"}],[{"start":279.74999999999994,"text":"The flood of so-called “ant” investors has helped to push volatility in South Korean stocks to the highest level since the global financial crisis."}],[{"start":288.94999999999993,"text":"“It feels similar to when real estate prices skyrocketed,” said SY Han, an office worker who lives in Sejong City. “Back in 2021 when Seoul housing prices surged those who took out loans to buy homes suddenly became rich, while those who just kept renting ended up penniless.”"}],[{"start":313.2499999999999,"text":""}]],"url":"https://audio.ftcn.net.cn/album/a_1779248727_9449.mp3"}