"Still Cheap": Global Giants Knock on the Door of the Korean Stock Market

ADIA and Others Show Keen Interest in Korean Investments

Major US Investors Join Through Family Offices

Earnings Growth Remains Strong... Hopes for Market Structure Reform

Despite the sharp fluctuations seen in the Korean stock market, global major investors are showing even greater interest. This is because among the core supply chains of the artificial intelligence (AI) industry, the memory semiconductor sector led by Korean companies is still trading at prices considered low compared to their earnings performance. The government's efforts to improve corporate governance and expand shareholder returns also appear to have raised expectations that the so-called "Korea Discount," which has weighed down the Korean stock market, may be resolved.

Even after doubling or tripling..."Profit growth is faster"

According to the Korea Exchange on August 12, the stock price of Samsung Electronics rose by 125.4% and SK hynix by 274.4% last year. As of the closing price on August 11 this year, Samsung Electronics is up 99.7% and SK hynix 118.1% compared to the beginning of the year. Nevertheless, global investors continue to monitor Korean semiconductor companies because profit projections are rising even faster than stock prices. As investments expand in AI data centers, demand is increasing not only for High Bandwidth Memory (HBM) but also for general-purpose DRAM and NAND, leading to observations that the revenue structure of memory manufacturers is becoming more stable than in the past.

After a recent sharp decline, it has been analyzed that SK hynix's price-to-earnings ratio (PER) for projected 2027 earnings has fallen to around 3 times. Despite the strong stock price increases, the market still views the memory industry as a typical cyclical sector. While it is conditional on future earnings meeting market expectations, foreign investors are paying close attention due to the perception that, compared to global AI companies or foundry firms, Korean memory players are relatively undervalued.

ADIA also contacts domestic asset managers...Big investors show increased interest

The Abu Dhabi Investment Authority (ADIA), one of the world’s largest sovereign wealth funds, is also expressing interest in the Korean market. ADIA representatives visited Korea in June and met with local asset management companies to explore the Korean capital market and potential investment strategies. This has been interpreted as exploratory moves to consider investing in Korean equities through local management firms.

The Abu Dhabi Investment Council (ADIC), a separate entity from ADIA, moved ahead proactively. It is known to have already invested about 300 billion won in the Korean stock market last year through asset managers such as Quad Asset Management and Petra Asset Management. Similarly, Norway’s sovereign wealth fund has reportedly entrusted funds to domestic independent managers including Quad Asset Management and VIP Asset Management.

It is not just sovereign wealth funds. Iconiq Capital, a family office managing assets of Silicon Valley magnates such as Meta CEO Mark Zuckerberg, invested about 100 billion won in the Korean stock market through Quad Asset Management last year. Global hedge fund Millennium Management has entrusted 374.6 billion won to Billionfold Asset Management. In May of this year, representatives from Yale University’s endowment fund visited Korea to hold sequential meetings with domestic firms such as VIP Asset Management, Life Asset Management, and Align Partners.

Benefiting from changes in the investment landscape and policy expectations

The interests of overseas funds are spreading beyond semiconductors to include sectors such as defense, shipbuilding, nuclear power, and electric equipment. Boston Consulting Group (BCG) stated in a report released last month that last year’s KOSPI total shareholder return (TSR) reached approximately 76%, significantly exceeding the averages for major global indices. The report attributed this to improved performance in semiconductors, defense, shipbuilding, and nuclear power sectors, as well as government-led capital market reforms which have prompted a reassessment of Korean stocks.

The government’s policy direction is also reinforcing the investment rationale for foreign institutional investors. Amendments to the Commercial Act have extended directors’ responsibilities to all shareholders, and since March this year, there is now an obligation to cancel newly acquired treasury shares. These changes are believed to be part of the reason why major global institutional investors—who have previously hesitated to invest in Korea due to weak governance—are returning. However, for this increased interest from large-scale investors to result in actual investment, further progress in domestic institutional reforms is still needed. There are ongoing calls to further supplement the "Anti-Stock Price Suppression Act," and concerns remain that exceptions to the ban on dual listings leave plenty of loopholes.

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