(Bloomberg) — While political crisis looms large over South Korea’s $1.6 trillion equity market heading into 2025, the artificial intelligence boom and Donald Trump’s presidency remain key factors for stock pickers.
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The ongoing “Corporate Value-Up” campaign is another top theme in what is one of the world’s worst-performing stock markets. Companies continue to get on board with the plan’s reforms, though a botched martial law decree and impeachment proceedings against the nation’s president have cast doubt over the political impetus.
The benchmark Kospi is on course for its longest monthly losing streak since 2008, with global investors accelerating withdrawals. The index is down more than 8% on the year, compared with an 18% gain in an MSCI Inc. gauge of global equities.
Though known as a tech-dominated market, Korean benchmarks have been weighed down by a 32% slide in heavyweight Samsung Electronics Co. due to its missteps in AI. Meanwhile Trump’s second term increases tariff threats over tech exports and clouds the outlook for electric-vehicle demand.
Investors say Korean stocks will continue to struggle in coming months while the Constitutional Court deliberates the impeachment of President Yoon Suk Yeol. At the same time, China’s big stimulus plans threaten to steal investor cash flows away from South Korea.
There are bright spots in the market, however, with the AI and governance improvement themes continuing to mint select winners. Overall, the cheapness of Korean stocks may provide some appeal as well.
“Excessive pessimism is what we’re seeing in the market right now,” said Yi Ping Liao, assistant portfolio manager at Franklin Templeton Emerging Markets Equity. “While the economic and earnings outlook is on the weak side, we do have quite a lot of valuation cushion,” and this in turn creates bottom-up opportunities, she said.
Here are the major winners and losers in the South Korean stock market in 2024.
Winner: Power Equipment
Power equipment suppliers were among the biggest gainers in emerging markets this year, as investors wager that electricity demand from AI data centers will trigger demand for new and upgraded gear at global grids. HD Hyundai Electric Co., which makes transformers and generators, topped the Kospi with a gain of more than 370% this year.
Winner: Noodle Maker
Another star this year was Samyang Foods Co., whose shares jumped more than 250% on surging demand for its spicy buldak noodles in the US and elsewhere helped by a viral TikTok video.
