South Korea’s stock market index Kospi has reportedly become the best-performing Asian equity benchmark in this year’s last quarter so far, with foreign investments worth around $4.6 billion into its stocks.
The key driver in its 15% growth this quarter has been the 18% jump in Samsung Electronics Co, with the country’s chip sector getting further lifted amid eased concerns of a rate hike on Friday after a softer-than-expected US inflation data was published.
The ongoing tensions between the US and China have also fostered growth, with Washington preferring Korean tech shares over Chinese rivals and the rebound in won against the US dollar.
Global technology shares have been rallying recently as the Nasdaq 100 reports its first quarterly growth this year, but analysts remain cautious amid looming doubts around Fed policy and a possible global recession.
Shin Jin-ho, Co-CEO of Midas International Asset Management, expects the rebound to continue this month, noting that although there are liquidity risks linked to project financing in the real-estate sector, the South Korean tech sector will continue seeing foreign fund inflows.
Kospi has been recording a drop in the last five quarters as it slipped 35% from its record high last year due to the drop in won, leading officials to intervene in the currency market.
Things took a turn in October with foreign funds jumping back into Korean stocks on perceived benefits from the Washington following ban on a few tech exports to China.
According to analyst Sanjeev Rana at CLSA Securities Korea, geopolitical issues have prompted many to turn to the Korean market, which is one of the few large liquid markets after China and Taiwan.
The equity index was also bolstered by the unveiling of the climate Bill by US President Joe Biden, boosting the appeal of the country’s battery supply chain, as LG Energy Solution’s stock rose 46% since September-end.
However, Kospi is still down 17% on-year due to a sell-off amid concerns around interest rates, sluggish growth, and tech valuations.