(April 21): Investor optimism that the worst of the Iran war may be over was on full display Tuesday, when the return of the AI trade drove South Korean stocks to a record and spurred another rally in Taiwan.
Korea’s Kospi Index rose as much as 2.3% to an all-time intraday high after the tech-heavy gauge erased all its losses driven by the Middle East conflict in the previous session. Samsung Electronics Co. and SK Hynix Inc. led the advance.
Animal spirits were also present in Taiwan, where Taiwan Semiconductor Manufacturing Co. helped push local stocks to a record as well.
The strong gains in the two tech-heavy Asian markets are the latest evidence of investors’ willingness to look beyond the twists and turns of the Iran war to refocus on the AI sector’s favourable dynamics such as tight chip supply. The Kospi has rallied over 50% this year to become one of the world’s top performers, putting Korea on track to follow Taiwan to overtake the UK in market capitalisation.
“The rally in Korean stocks comes as the tech theme regains the spotlight as markets move on from war headlines to earnings and AI demand,” said Anna Wu, a cross-asset strategist at Van Eck Associates Corp. “Investors are rebuilding conviction to ‘buy on the way up’.”
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More broadly in Asia, MSCI’s technology index for the region rose 2.6% to extend its year-to-date advance to nearly 40%, partly encouraged by signs that Iran may join peace talks with the US.
That came after the Philadelphia Semiconductor Index notched a 14th straight session in the green — a winning streak that it had exceeded just once, in 2014.
Korean shares have staged a comeback from the early days of the Middle East conflict, when surging oil prices triggered a historic selloff in the energy import-dependent market. Investor mood has since stabilised on fundamental improvements across industries including semiconductors, prompting Goldman Sachs to lift its Kospi target to 8,000.
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JPMorgan Chase & Co strategists including Mixo Das raised their “bull case” Kospi target to 8,500 in a note dated Friday. They remain constructive on the “higher for longer” cycle for memory chip prices.
Analysts’ consensus forward earnings estimates for the Kospi Index have increased by 180% over the past year to a record high, Bloomberg-compiled data shows.
Shares of Samsung Electronics and SK Hynix were trading at 5.6 and 4.8 times forward earnings, even after this year’s rally. Those compare with a ratio of about 22 for a benchmark US chip stock gauge.
Foreign and local funds were net buyers of Kospi members on Tuesday while Korean retail investors were net sellers.
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