Foreign media: South Korea's Kospi is now driving global investor sentiment

The Kospi, heavily weighted toward AI-related stocks, is emerging as a leading indicator of global investor sentiment, Bloomberg reported.

Fund managers in London, New York and Tokyo have made checking South Korea's stock market before the start of their trading day a new routine, according to Yonhap and Bloomberg. Share price movements at Samsung Electronics and SK hynix are setting the tone for semiconductor stocks worldwide.

Andrew Jackson, head of Japan equity strategy at Ortus Advisors, added the Kospi to his close-watch list earlier this year — for the first time in more than two decades in the industry. Harald van der Linde, head of Asia-Pacific equity strategy at HSBC, said South Korea now comes up "in every meeting." Hani Redha, a portfolio manager at PineBridge Investments in London, said "we are all Korean investors now," adding that he checks the Korean market every morning to gauge AI investment sentiment.

After the Korean market closes, attention shifts to SK hynix ADRs and Korea-focused ETFs trading in New York, sustaining a round-the-clock flow of trades driven by Korean market sentiment. "It's almost like tracking it 24 hours a day," Redha said.

That dynamic was on full display last week. As skepticism over AI demand flared, the Kospi plunged nearly 9% in a single session on Monday, and the selloff spread to US markets. SK hynix ADRs fell 9.3%, dragging down other major semiconductor stocks.

The 60-day correlation between the Kospi and the Nasdaq 100 has climbed to 0.46, near its highest level in two years, according to Bloomberg data — roughly three times the five-year average of 0.16. The influence was even more pronounced during Korean market downturns: the Nasdaq 100's sensitivity to Kospi moves during periods of Korean weakness rose to its highest level since 1990 on July 7.

"Korea has in effect been absorbed into the same volatility ecosystem as the Nasdaq and the Philadelphia Semiconductor Index," said Ivan Feinseth, chief investment officer at Tigress Financial Partners. "SK hynix, Samsung Electronics and the Kospi are now serving as pre-market indicators of US AI and semiconductor risk." He added that South Korea is no longer "a distant, secondary emerging market."

The volatility carries a shadow, however. The Kospi has fallen 25% from its June peak, wiping out roughly $1 trillion in market capitalization. Shares of Samsung Electronics and SK hynix have each dropped more than 30% from their highs. Bloomberg also noted that leveraged trading has amplified price swings, making the Kospi one of the most volatile major indexes in the world.

"A relatively immature market with high leverage-driven volatility is leading the broader market, which can cause share prices to diverge from fundamentals and make trading decisions more difficult," said Kobayashi Chisa, a Japan equity strategist at UBS SuMi Trust Wealth Management. Some analysts warn that if the Korean market's sharp declines continue, its global influence could itself begin to fade.