If you’re the type to follow the goings-on of the global AI trade – or you have been listening to the HotCopper Wire podcast – you’re likely aware that Korea’s stock market, the KOSPI index, has been acting a lot like a meme stock over the last six months.
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The AI-charged market, driven largely by Samsung but also by other data-hardware players like SK Hynix (the latter recently listed on the NASDAQ), has been pulling off its own Trump-style rally of late, similar to Japan’s NIKKEI.
If the fact I’ve brought up the South Korean goliath Samsung doesn’t make it clear, these markets are going up along with Wall Street because they’re tech-heavy. Which really means AI.
Lately, however, tech exposure alone hasn’t been enough to carry a torch unwaveringly. The US market has had a lot to contend with recently.
For instance: the on-again-off-again-on-again-off-again US war with Iran; Brent crude (and WTI oil) prices re-approaching US$100/bbl before cooling back off yet again this week; inflationary concerns borne from both oil volatility and ongoing tariff impositions.
That’s to say nothing of a new Fed chair, Kevin Warsh, who despite being hawkish in his past has made the curious move to basically stop giving guidance to the market. Add all this together, plus the fact June and July tend to see heavy selling, well, there’s been a lot of nerves around. Luckily, US earnings season is re-injecting optimism back into the zeitgeist.
So it’s not surprising then many have been checking out what the KOSPI is doing on any given day as well as the NASDAQ, given the KOSPI has become something of a canary indicator for bullish tech sentiment (albeit, a very large canary.)
But while the Korean index is up over a 5D basis, the six-month chart reveals a different story – the entire Korean stock market is coming back down to reality. But that’s not entirely because US bullishness is wavering.
But it’s that big V shaped recovery at the far end of the chart in late July that I’m interested in – because what pushed the KOSPI to an easy six-month-low on July 28 wasn’t anything to do with contagion sentiment in the US of A.
Shanghai CXMT listing makes waves
It was actually a move that came out of China, when the Shanghai stock market saw China’s own chip giant debut hit its IPO boards – China’s CXMT Corp.
The geopolitical ramifications of China listing CXMT might not yet be evident at the trade flows and policy level, but in the mind of market participants, the implications are obvious.
First: China is now getting serious about taking on the likes of NVIDIA et al, with the listing of its own data hardware behemoth. Worth noting is that the CXMT listing also seriously sucked some gas out of short-lived-darling SK Hynix when the former listed on July 28 too.
So what does that tell us? Well, some investors now might be less inclined to pump money into US and US-allied markets like South Korea and Japan when China is now at a stage where it can list its own tech giants and create its own headline-grabbing IPO buzz.
Which has been more or less proven, now, given that on its Shanghai debut, CXMT Corp shares climbed over +460% in a single day. Not even a now clearly struggling Space X, headed by Elon Musk, was able to pull that off.
So where to from here? It’s unclear, really, in any long-horizon sense. But while a lot of people are pointing to the KOSPI as a side-effect of American exuberance, the market now needs to factor in China’s growing technological capabilities as reflected in public markets.
Evidenced by CXMT now being China’s most highly valued company.
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