This week, global funds moved more sensitively to the South Korean semiconductor exposure market than to emerging markets as a whole. However, the Won/Dollar exchange rate around 1500 won remained a key variable moderating the pace of foreign inflows. [Photo=Yonhap News Agency Synthesis]This week, funds were more sensitive to the South Korean semiconductor exposure market than to emerging markets as a whole.

The strength of EWY showed that global funds are re-evaluating Korea as part of the AI infrastructure value chain.

However, the Won/Dollar exchange rate around 1500 won remains the biggest limiting factor for foreign inflows.

The theme of this week's trend is 'Fund flows compressed into South Korean semiconductors'.

In the third week of May, global funds shifted direction multiple times.

At the beginning of the week, funds moved to defensive sectors such as energy, healthcare, and utilities to avoid rising oil prices and interest rates. However, as expectations for US-Iran negotiations grew and oil prices fell towards the end of the week, funds returned to tech stocks and semiconductors.

This trend is significant for the South Korean stock market. If global capital rotation returns to semiconductors and AI infrastructure, the Korean market is one of the first to react.

This week, the Capital Rotation Radar poses one question:

Is foreign capital preparing to re-enter the South Korean stock market, or is it still observing due to currency pressure?

The answer lies somewhere in between. EWY, a South Korea-focused ETF, rebounded strongly towards the end of the week, signaling that overseas investors are starting to look at the Korean market again. However, the Won/Dollar exchange rate remained around 1500 won. If the exchange rate stays at a high level, foreign investors must consider the risk of currency losses even if they expect stock price increases. Therefore, this week's fund flow is closer to "conditions are being created to re-examine South Korean semiconductors" rather than "we have started buying South Korea."

Three structures were identified in this week's fund flows.

First, South Korea's relative strength was more prominent than emerging markets as a whole.

EEM is an ETF tracking emerging markets as a whole, and EWY is an ETF representing the South Korean market.

The stronger performance of EWY than EEM in the latter half of the week means that the Korean market is not being subsumed by the overall trend of emerging markets, but is reflecting expectations for semiconductors and AI infrastructure separately.

The South Korean stock market is no longer simply a cyclical emerging market, but is being evaluated as a market linked to AI data centers and memory demand.

Second, funds flowed into the downstream value chain rather than leading stocks.

While Nvidia's stock price paused due to the burden of pre-reflected earnings expectations, memory and storage-related stocks such as Micron, Sandisk, and Seagate were strong.

This indicates that AI investment is expanding from graphics processing units (GPUs) to memory, storage, power, cooling, and networks.

In the South Korean stock market, this trend can extend not only to Samsung Electronics and SK Hynix but also to companies involved in HBM, SSD, semiconductor equipment, and power facilities.

Third, the exchange rate is a speed-control mechanism for foreign inflows.

With the Won/Dollar exchange rate hovering around 1500 won, strong buying of South Korean stocks by foreign investors is difficult to sustain.

Even with increased expectations for the semiconductor industry outlook, 현물 (spot) buying may be limited due to high currency pressure. Conversely, if the exchange rate stabilizes, the likelihood of both foreign futures and spot buying increases.

Next week, the exchange rate will be a key variable that opens and closes the door for foreign inflows in the South Korean stock market, rather than just a macroeconomic variable.

The movement of the KOSPI 200 overnight futures is also worth watching.

The rebound in overnight futures from the middle of the week onwards signifies that anticipations for domestic large-cap stocks, especially large-cap semiconductor stocks, have revived. Overnight futures often provide an early indication of foreign futures flows and index direction in the next regular trading session.

The improvement in overnight futures at the end of this week suggests that the South Korean stock market is already reflecting, to some extent, the rebound in New York tech stocks and the strength in memory.

In conclusion, this week's fund flows were not indiscriminate buying of the entire South Korean stock market, but a selective re-evaluation of semiconductors and AI infrastructure.

Foreign capital is still mindful of the exchange rate, but interest in South Korea's semiconductor value chain has reawakened.

The key points to watch next week are threefold:

First, whether the Won/Dollar exchange rate stabilizes below 1500 won.

Second, whether foreign investors connect their KOSPI 200 futures buying to spot buying.

Third, whether the rebound in large-cap stocks, led by Samsung Electronics and SK Hynix, expands to the downstream value chain, including equipment, materials, and power facilities.

※ This article is for reference and analysis to help understand fund flows, not an investment recommendation. Actual market conditions and stock prices may vary depending on exchange rates, foreign inflows, global interest rates, and sector-specific earnings.