SK hynix leads Kopsi to new highs again, but the P/E ratio is still below that of semiconductor peers—can it reverse South Korea’s discount?

The Korea Composite Stock Price Index (KOSPI) hit a record high during Tuesday’s trading, mainly driven by strong momentum from the artificial intelligence (AI) industry and optimistic expectations for a U.S.-Iran peace agreement. The index was up as much as 2.2% at intraday highs, quickly recouping the losses caused by earlier geopolitical tensions; since the start of the year, its cumulative gain has already exceeded 50%. The core behind this rally is led by memory-chip makers Samsung Electronics and SK hynix. In addition to solid fundamentals supported by a tight semiconductor supply-demand situation, corporate governance reforms and shareholder return programs promoted by the South Korean government have also injected fresh liquidity into the capital market, with total market capitalization of $3.8 trillion.

AI demand and geopolitical easing, Korean stocks set a new high again

The recent strong performance of the Korean stock market mainly reflects a favorable overlap of two fronts: macroeconomics and geopolitics. On the one hand, global AI development is driving massive demand for high-end memory chips, causing the supply chain to remain tight. On the other hand, as signs emerge that the U.S. and Iran may begin peace negotiations, overall investment sentiment in Asian markets has turned more stable. This has effectively eased the market sell-off pressure that had been intensified by the Middle East conflict pushing up oil prices, thereby prompting the index to rebound quickly and break above the previous high.

Samsung, SK hynix valuations far below U.S. peers

Although the KOSPI index has surged sharply, the market has seen a rare pattern of valuation declines—meaning the price-to-earnings ratio (P/E) is moving down rather than up. Analysts say the main reason is that Samsung Electronics and SK hynix have benefited from strong pricing power and tighter supply-demand conditions; their earnings forecasts have been revised upward far faster than the rise in their stock prices. According to Bloomberg data, the two companies’ implied forward P/E ratios are currently only about 5.6 times and 4.8 times, respectively, significantly below the 22 times benchmark for U.S. peers. This shows that, supported by solid earnings fundamentals, Korean chip stocks still maintain relatively low valuation levels.

JPMorgan raises Kopsi target price to 8500

With improving fundamentals, steady momentum in industries such as semiconductors, defense, and power equipment has attracted net foreign and local institutional buying, while retail investors have shown net selling. Based on expectations that memory chip prices will stay “higher for longer,” an investment-banking strategist team at JPMorgan has raised its KOSPI target price to 8,500 points, betting that memory chip prices will continue to rise. Strong capital inflow momentum is supporting steady growth in South Korea’s total stock market capitalization; it has already surpassed France and Germany and is expected to further overtake the United Kingdom.

“Korea discount” can it attract more buy-side demand?

Korean stocks have long exhibited the so-called “Korea Discount” phenomenon, which directly affects valuations of large-cap, high-weight stocks. This phenomenon is mainly driven by South Korea’s unique chaebol-dominated corporate structure, with complex cross-shareholdings and corporate governance issues that often lead the market to worry about minority shareholders’ rights. In addition, compared with European and U.S. markets, Korean companies have historically been relatively conservative in shareholder return policies such as cash dividend distributions and share buybacks.

Against the backdrop of the U.S.-China tech trade war, memory giants face significant uncertainty in how they position supply-chain arrangements and in key technology export controls. At the same time, as a highly export-dependent economy, South Korea is directly impacted by currency fluctuations and global trade frictions, pressuring companies’ real profits and pushing the market to assign relatively conservative pricing.

However, since South Korean President Lee Jae-myung took office in June last year, he has actively pushed a series of capital market reform measures, aiming to address the long-standing “Korea Discount” problem and to strengthen corporate governance and shareholder rights. Today, foreign and local funds are net buying shares of constituents of the Korea Composite Stock Price Index (KOSPI), causing the Kopsi index to hit an all-time high of 6357.

(From day-trading retail investors to South Korea’s president, Lee Jae-myung leads KOSPI to a fresh record high)

As for Korean stocks that still trade at a deep discount, whether they can attract more investors’ buying demand is still worth watching.

This article—SK hynix leads Kopsi to yet another record high; can the P/E still being below that of semiconductor peers reverse the Korea discount?—was first published on Chain News ABMedia.