"Avoiding Korean Stocks... Once Shining, South Korea's Market Now Lags as an Investment Destination"

"Double Whammy of War and Memory Sector"
...Reported by Bloomberg

Bloomberg reported on the 31st that the South Korean stock market, once considered a market to watch, has now been relegated to an underperforming investment destination in the aftermath of the Iran war. Since the Korean stock market has risen mainly on a small group of semiconductor stocks such as Samsung Electronics and SK hynix, the combination of external shocks like the Iran war and concerns about industry conditions has exposed structural vulnerabilities.

On the 31st, as the KOSPI index dropped more than 4% in early trading, breaking below the 5100 level, the current status of the domestic stock market was displayed on the electronic board of the dealing room at Hana Bank headquarters in Jung-gu, Seoul. On the same day, the won-dollar exchange rate continued to face upward pressure, exceeding 1520 won during the trading session. March 31, 2026 Photo by Kang Jinhyung

Bloomberg noted that this month’s sharp rise in international oil prices has weakened the outlook for South Korea’s energy-dependent economy, leading to heavy selling on both the KOSPI and KOSDAQ. At the same time, optimism regarding demand for memory semiconductors has also begun to wane.

The domestic stock market has plummeted, with the KOSPI falling 19% and the KOSDAQ dropping over 11% this month based on closing prices. This is the largest decline among the 92 major indices tracked by Bloomberg.

Matthew Haupt, a fund manager at Wilson Asset Management in Sydney, stated, “We are staying away from Korean stocks due to the double whammy of war and the memory sector. Even a single war is already a heavy burden, and now there are two negative factors at the same time.”

He added, “We are entering a more uncertain phase, so it is risky to trade the KOSPI, which is subject to concentrated investments.”

Bloomberg also reported that, as South Korea is an energy importer, it faces greater risks of rising inflation and monetary tightening. The country relies on the Middle East for more than 70% of its crude oil imports, making it highly exposed to oil price shocks.

Marvin Chen, a strategist at Bloomberg Intelligence, emphasized, “The risk of war has not yet been fully priced in by the market. The longer oil prices stay elevated, the more corporate earnings momentum could weaken.”

Recently, concerns have arisen about whether demand for semiconductors can be sustained, especially after Google released its new 'TurboQuant' technology aimed at improving AI operating efficiency. Given that Samsung Electronics and SK hynix together account for nearly 40% of the KOSPI, the index is inevitably affected.

Goldman Sachs recently analyzed that the outflow of foreign capital has been driven primarily by selling of Samsung Electronics and SK hynix. The foreign ownership ratio for both stocks has also fallen to its lowest level since 2022.

Bloomberg reported that many investors intend to wait on the sidelines until it becomes clearer how severe the supply chain disruptions from the Middle East conflict will be.

Gerald Gan, Chief Investment Officer (CIO) at Lead Capital Partners, said, “If the war lasts another one or two months, I will likely continue to wait until at least the end of this year or early next year before revisiting Korean stocks.” He added, “I prefer to hold cash and buy gold.”

This content was produced with the assistance of AI translation services.