{"id":487261,"date":"2026-06-07T08:07:11","date_gmt":"2026-06-07T08:07:11","guid":{"rendered":"https:\/\/www.newsbeep.com\/ie\/487261\/"},"modified":"2026-06-07T08:07:11","modified_gmt":"2026-06-07T08:07:11","slug":"worlds-hottest-market-has-korea-bulls-reaching-for-protection","status":"publish","type":"post","link":"https:\/\/www.newsbeep.com\/ie\/487261\/","title":{"rendered":"World\u2019s hottest market has Korea bulls reaching for protection"},"content":{"rendered":"

A wave of optimism over South Korean stocks<\/a> is giving way to growing caution, as some investors hedge positions and pare back crowded trades on concerns that the rally has run too hot, too fast.<\/p>\n

Hedge fund Golden Horse Fund Management has trimmed exposure and added derivative protection, while M&G Investments has cut memory and foundry holdings to broaden out down the AI supply chain<\/a>. A Bloomberg Intelligence analysis of options on the iShares MSCI South Korea ETF shows investors seeking protection against a decline. The fund tumbled 14% Friday in the US.<\/p>\n

The moves highlight the challenge facing global money managers. While investors remain upbeat about Samsung Electronics<\/a> Co. and SK Hynix<\/a> Inc., the two chip giants that powered Kospi<\/a>\u2019s more than 90% rise this year, many are becoming pickier about where to put new money and keeping cash ready for opportunities elsewhere.<\/p>\n

Friday\u2019s selloff in US tech stocks, driven by fears of higher interest rates, shows how quickly popular trades can unwind once sentiment shifts. That risk could spillover into Korea once local markets open.<\/p>\n

\u201cWe\u2019ve been trimming gross exposure at the margin and layering derivative protection over the last few weeks,\u201d said Yi Ling Ong, managing partner at Golden Horse Fund. Several large IPOs, including a SpaceX listing this month, could lead to rotation as funds raise cash to participate, making it \u201cprudent to hold some dry powder,\u201d she said.
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Over the past year, Korean stocks captured global attention as a combination of the AI boom and the government\u2019s successful corporate reform propelled the index to new highs. Strong earnings potential continues to underpin bullish sentiment, but the extended rally has led to crowding in a few major players, leaving the market vulnerable to abrupt reversals. The benchmark tumbled 7% at one point on Friday.
The caution is showing up in the derivatives market.
\u201cThe debate isn\u2019t whether the Kospi story remains attractive \u2014 it\u2019s how to stay invested without giving back a portion of the gains,\u201d said Tanvir Sandhu, global chief derivatives strategist at Bloomberg Intelligence. Options activity in the EWY ETF suggests investors are becoming more cautious, with demand shifting from upside exposure to downside protection, he said.<\/p>\n

Some investors are looking for opportunities beyond Samsung Electronics and SK Hynix, whose meteoric rise propelled them into the $1 trillion valuation club and helped Korea briefly overtake India as the world\u2019s sixth-largest stock market.<\/p>\n

\u201cThe alpha lies lower down the value chain \u2014 in the picks-and-shovels of the picks-and-shovels,\u201d said Vikas Pershad, portfolio manager at M&G, referring to companies that benefit from spending on AI infrastructure without being at the heart of the trade.<\/p>\n

Not Bearish<\/p>\n

To be sure, the rotation doesn\u2019t signal investors turning bearish on Korea. Valuations remain cheaper than in rival tech hub Taiwan and investors say the market still offers one of the strongest AI-linked stories in global equities. <\/p>\n

At 8.6 times forward earnings, the Kospi trades below its five-year average of 10 times and is much cheaper than Taiwan\u2019s benchmark, which trades at about 20 times, data compiled by Bloomberg show.<\/p>\n

Earnings upgrade cycle has also started to broaden. Excluding Samsung and SK Hynix, the rest of the Kospi is now expected to deliver more than 50% profit growth this year, up from just 20% in January, according to Golden Horse Fund. <\/p>\n

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\u201cThe speed of the rally has been vertiginous but in this type of market I would rather let the rally continue,\u201d said Rajeev De Mello, global macro portfolio manager at Gama Asset Management SA. \u201cExiting now will make it very difficult to re-invest later if the market doesn\u2019t correct.\u201d<\/p>\n

Still, foreign outflows<\/a> have become a concern. Global funds have pulled a record $76 billion this year, selling in every session over the past month. While part of the retreat is due to technical limits on single-stock holding, the selling has been absorbed by more fickle retail investors \u2014 a dynamic that may heighten volatility.<\/p>\n

At the same time, some investors are growing wary of rising retail leverage. The concern is that popularity of leveraged ETFs and the planned weekly single-stock options could amplify swings in an already-volatile market. <\/p>\n

While the products are \u201creally interesting\u201d and show retail participation is growing, they also leave the market \u201cin somewhat of a precarious position in case of a reversal,\u201d Stephane Martin, head of derivatives institutional sales for Asia at Optiver, said at a panel discussion at Bloomberg\u2019s Volatility Forum last week. <\/p>\n

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)<\/p>\n","protected":false},"excerpt":{"rendered":"A wave of optimism over South Korean stocks is giving way to growing caution, as some investors hedge…\n","protected":false},"author":2,"featured_media":487262,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[11],"tags":[130717,72,113,37725,7286,61,60,45226,6375,81767,209451],"class_list":["post-487261","post","type-post","status-publish","format-standard","has-post-thumbnail","category-economy","tag-ai-supply-chain","tag-business","tag-economy","tag-foreign-outflows","tag-hedge-funds","tag-ie","tag-ireland","tag-kospi","tag-samsung-electronics","tag-sk-hynix","tag-south-korean-stocks"],"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/posts\/487261","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/comments?post=487261"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/posts\/487261\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/media\/487262"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/media?parent=487261"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/categories?post=487261"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/tags?post=487261"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}