South Korea falls into bear market as traders fret over AI chipmakers’ prospects

{"text":[[{"start":10.65,"text":"South Korean stocks have entered a technical bear market as investors raise concerns about the long-term prospects of the AI chipmakers that have driven a world-beating rally."}],[{"start":20.5,"text":"The Kospi index is down more than 20 per cent from its record high in June after slipping more than 5 per cent on Wednesday."}],[{"start":29.25,"text":"A fall of more than 20 per cent from a recent peak represents a technical bear market, though the Kospi is still the world’s top-performing major stock index this year, having returned more than 70 per cent in local currency terms."}],[{"start":43.7,"text":"On Wednesday, the market’s two largest constituents, Samsung Electronics and SK Hynix, fell 6.3 per cent and 5.7 per cent, respectively. Shares of the two companies have surged as a result of demand for their memory chips, which are crucial for the data centres that power AI apps."}],[{"start":62.6,"text":"However, sentiment has started to turn. Samsung’s shares tumbled as much as 10 per cent on Tuesday, even though the company projected a third straight quarter of record operating profit."}],[{"start":null,"text":"

"}],[{"start":74.95,"text":"Analysts attributed the declines to a lack of clarity on how South Korean chipmakers would enforce long-term agreements with customers over chip purchases."}],[{"start":84.45,"text":"US competitors such as Micron have shifted their business model to include longer-term purchasing agreements, but it remains unclear whether Samsung and SK Hynix have been able to secure similar contracts."}],[{"start":96.60000000000001,"text":"“At the moment we have not heard officially from the Korean peers how they plan on executing on these long-term contracts,” said Jason Lui, head of Asia-Pacific equity and derivative strategy at BNP Paribas."}],[{"start":108.10000000000001,"text":"Lui said South Korean chipmakers could see their price-to-earnings ratio rise “if they can move to longer-term contracts”."}],[{"start":115.50000000000001,"text":"“Given the fundamentals of how strong the Korean market has been over the past two years it’s challenging to call it a bear market,” he said."}],[{"start":123.30000000000001,"text":"Volatility in the South Korean market is being exacerbated by the proliferation of leveraged exchange traded funds that magnify gains and losses."}],[{"start":133.05,"text":"On Tuesday the head of South Korea’s financial regulator warned of “excessive” leveraged stock investments among retail investors."}],[{"start":141.65,"text":"Some fund managers welcomed the move downwards, saying it was inevitable."}],[{"start":146.3,"text":"“This is a necessary correction because the rise was too steep and fast,” said Chan Lee of Petra Capital Management. “There are possible buying opportunities outside of AI as well.”"}],[{"start":158.65,"text":"Jongmin Shim, Korea equity strategist at CLSA, said: “I don’t think this story is over. It’s just a bit of a correction on the way up. Nothing goes up forever.”"}],[{"start":168.65,"text":"The correction comes just days before SK Hynix plans to list shares on US exchanges for the first time in a $29bn offering that is expected to be the largest-ever share issuance by an Asian company."}],[{"start":189.55,"text":""}]],"url":"https://audio.ftcn.net.cn/album/a_1783501576_7585.mp3"}